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INSTRUCTIONSBOOKLETINDIVIDUALINCOME TAX RETURN2020

INFORMATION

FOR PUERTO RICOFILE YOUR RETURN BEFORE MAY 17, 2021

DEPARTMENT OF THE TREASURYGOVERNMENT OF PUERTO RICO

DUE DATE:Monday, May 17, 2021

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TABLE OF CONTENTFiling Requirements ..........................................................................................................................

Taxpayer Bill of Rights ....................................................................................................................

Relevant Facts .................................................................................................................................

Suggestions to Avoid Mistakes when Filing your Return........................................................

Additional Child Tax Credit for Bona Fide Residents of Puerto Rico .....................................................

Instructions to Complete the Return:

Taxpayer Moved to Puerto Rico During the Year .........................................................................Name, Address and Social Security Number ...............................................................................Change of Address ....................................................................................................................Taxpayer Deceased During the Taxable Year ..............................................................................Questionnaire - Taxpayer Information ..........................…........................................................……..Refund ………………………………………………………………...................................................….Payment …………………………………………………………...............................................…….…..Deposit – Authorization for Direct Deposit of Refund ………................................................…...….Signature of the Return …………………………………..…........................................................……Payment for the Preparation of the Return ………………..……................................................……Part 1 - Adjusted Gross Income ………………………….....................................................…..…....Part 2 - Deductions, Exemptions and Net Taxable Income ...................................................................Part 3 - Computation of Tax, Credits and Tax Withheld or Paid ...............................................................

Instructions to Complete the Schedules:

Schedule A Individual - Deductions Applicable to Individual Taxpayers …...............................…

Schedule A1 Individual - Dependents and Beneficiaries of Educational Contribution andMy Future Accounts ............................................................................

Schedule A2 Individual - Tax on Income Subject to Preferential Rates ……..............................……

Schedule B Individual - Recapture of Credits Claimed in Excess, Tax Credits, and Other Paymentsand Withholdings ………….............................................…………………

Schedule C Individual - Credit for Taxes Paid to Foreign Countries, the United States,its States, Territories and Possessions ....................................................

Schedule CH Individual - Transfer of Claim for Exemption for Child (Children) of Divorcedor Separated Parents ..........................................................................

Schedule CO Individual- Optional Computation of Tax ................................................................

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Instructions to Complete the Schedules (Continued):

Schedule D Individual - Capital Assets Gains and Losses, Total Distributions from Qualified PensionPlans and Annuity Contracts ...................................................................

Schedule D1 Individual - Sale or Exchange of Principal Residence ..................................................

Schedule DDC Individual - Due Diligence Checklist by Accredited Agent - Tax Returns Specialist .....

Schedule E - Depreciation ................................................................................................................

Schedule E1 - Depreciation for Business with Volume of $3,000,000 or Less .........................................

Schedule F Individual - Other Income …..................................................………………………….

Schedule FF Individual - Interests, Dividends and Miscellaneous Income …....................................

Schedule F1 Individual - Detail of Income of Resident Individual Investors .....................................

Schedule G Individual - Sale or Exchange of All Trade or Business Assets of a SoleProprietorship Business ............................................................................

Schedule H Individual - Income from Annuities or Pensions in the form of periodic payments .........

Schedule IE Individual - Excluded and Exempt Income……...........................................…………

Schedules J Individual, K Individual, L Individual, M Individual and N Individual ....................................

Schedule J Individual - Manufacturing IncomeSchedule K Individual - Income from the Sale of GoodsSchedule L Individual - Farming IncomeSchedule M Individual - Income from Services RenderedSchedule N Individual - Rental Income

Schedule O Individual - Alternate Basic Tax ....................................................................................

Schedule P Individual - Gradual Adjustment ...............................................................................

Schedule R Individual - Partnerships, Special Partnerships and Corporations of Individuals(Reconciliation)...................................................................................

Schedule R1 Individual - Partnerships, Special Partnerships and Corporations of Individuals .........

Schedule T Individual - Addition to the Tax for Failure to Pay Estimated Tax in Case of Individuals ....

Schedule X Individual - Optional Tax to Self Employed Individuals ..............................................

Obligation to Pay Estimated Tax ................................................................................................................

Occupational Codes List ........................................................................................................................

Check List ..........................................................................................................................................

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a) Every individual resident of Puerto Rico who is an individual taxpayer, married or married individual livingwith spouse who opts to file a separate tax return, whose gross income net of exemptions for the taxableyear is more than zero, unless the tax has been totally withheld at source;

b) Every individual not resident of Puerto Rico, citizen of the United States or nonresident alien, who is anindividual or married taxpayer, whose gross income from Puerto Rico sources for the taxable year, net ofexemptions, exceeds zero, unless the tax has been totally paid at source; or

c) Every individual who during the taxable year has net income subject to alternate basic tax of $25,000 ormore.

FILING REQUIREMENTSWHO MUST FILE THE INCOME TAX RETURN?

WHEN MUST THE RETURN BE FILED?If you file on a calendar year basis or do not keep accounting records, you must file yourreturn on or before Wednesday, April 15, 2021. Notwithstanding, as established inAdministrative Determination No. 21-04, the return corresponding to taxable year 2020must be filed on or before Monday, May 17, 2021.

HOW THE RETURN MUST BE FILED?The return must be filed electronically through the Internal Revenue Integrated System (SURI, for its Spanishacronym) or using any program or application certified by the Department, following the procedures established bythe Department in the Internal Revenue Circular Letter No. 21-06 of February 25, 2021 ("CC RI 21-06").

MAY 17

ALL TAXPAYERS MUST FILE THEIR RETURNS ELECTRONICALLY

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The Taxpayer Bill of Rights grants the following rights underthe Puerto Rico Internal Revenue Code of 2011, as amended(Code):

To receive a proper, considerate and impartial treatment.

The information submitted will be confidential.

All interviews must be at a reasonable time and place for thetaxpayer, in coordination with the employee of the Departmentof the Treasury (Department).

The interview or audit will not be used to harass or intimidate inany manner the interviewed person.

To receive a clear and simple explanation of the process towhich the taxpayer will be subjected and the rights that assisthim.

To be assisted by an attorney, accountant, certified publicaccountant or any other authorized person, at any momentduring the interview.

To be informed prior to the interview of the intention to tape theinterview, and to be able to obtain an exact copy of such recordingsubject to the payment of the cost thereof.

To be informed of the nature of your tax liability.

To be advised of your right against self-incrimination by yourown testimony, to remain silent and that your silence should notbe taken or commented against you, in case of a possibleexposure to a criminal action.

To consult an attorney, accountant, certified public accountant,or agent authorized to represent you within the Department atany moment during the interview, or to be able to conclude theinterview even when it has commenced.

To be notified in writing of any adjustment made by theDepartment as a result of a tax audit when it involves theaddition of interests, penalties and surcharges, as provided bythe Code, as well as the exact amount of the adjustment and thereasons for such changes.

To claim the benefits of a payment plan if you can’t pay the fulltax liability when it becomes due.

TAXPAYER BILL OF RIGHTS

To waive the rights described in the preceding paragraphs, ifsuch waiver is made knowingly and voluntarily.

To grant a written power of attorney to authorize any person torepresent you during a tax interview or process. Such personshall receive, for purposes of the interview, equal treatment asyou, unless you are notified that such person is responsible foran unreasonable delay or interference with the audit.

No discrimination on the basis of race, color, sex, birth, origin orsocial condition, or political, religious ideas or association ofany taxpayer or his/her representative. No records will bemaintained of tax information for these purposes.

The Department’s employees will explain and protect yourrights during all phases of the process. If you believe that yourrights have been violated, you should discuss this matter withthe supervisor of the employee. If you do not agree with theaction taken by the supervisor, you may file a complaint with theOffice for the Protection of Taxpayer Rights.

OFFICE FOR THE PROTECTION OF TAXPAYER RIGHTS

The Office for the Protection of Taxpayer Rights (Ombudsmanof the Taxpayer) was created to assure compliance with theprovisions of the Taxpayer Bill of Rights. Said office is located atthe Department of the Treasury in Old San Juan, Office 105.For assistance, please call (787) 977-6622, (787) 977-6638or (787) 721-2020, extension 2180.

The Ombudsman of the Taxpayer is responsible for attendingthe problems and claims of the taxpayers and to facilitate theprocess between the taxpayers and the Department. Also, theOmbudsman of the Taxpayer has authority to prevent or correctany infringement of the rights of the taxpayer made by anyemployee of the Department.

For additional information, you can request the booklet: “Cartade Derechos del Contribuyente”.

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NEW TAX BENEFITS

A 8% reduction is granted to the normal tax for individualswith a gross income that does not exceed $100,000.

Various reimbursable credits from the Federal Governmentwere granted, subject to certain limitations. Among them, theAmerican Opportunity Tax Credit and the Economic ImpactPayment.

SIGNIFICANT CHANGES IN THE RETURN

We remind you that from the year 2019 the restrictions for theelectronic filing requirement were eliminated. Therefore, thisreturn must be filed electronically through SURI or using anyprogram or application certified by the Department.

Return

In question H of the Questionnaire is included reference to Act60-2019 for a qualified physician.

In Part 1, line 1, rows related to withholding statements underAct 14-2017 are renamed, so that they read "Total of withholdingstatements with this return under a qualified physician decree"and "Total of W-2 Forms with this return under a qualifiedphysician decree", respectively.

In Part 1, line 2K, a space is provided to indicate the total grossincome received from the distributable share on profits frompartnerships, special partnerships, and corporations ofindividuals.

In Part 2, lines 11 and 12 are renamed as "Net income beforethe deduction for Private Equity investment" and "Allowablededuction for Private Equity investment", respectively.

In Part 3, line 17 is provided to indicate if the tax determined is95% or 92% of the normal tax. In addition, line 27D is renamedas "Reimbursable credits from the Federal Government".

Schedule A Individual

Part I of this schedule is reorganized to be used also by thosetaxpayers who choose the optional computation of tax.

On line 1, two columns are added to indicate the control numberand electronic filing confirmation number of Form 480.7A wheremortgage interests are reported. Also is provided on line 1(e)to indicate said information regarding mortgage interest notreported on a Form 480.7A.

Lines 6 and 10 are added to indicate the amount to be transferredto Schedule CO Individual, as applicable, of the total deductionsattributable on a 50% basis or individually, in the case oftaxpayers who choose the optional computation.

Schedule A2 Individual

Line 12 is added to reflect the breakdown of the computation ofnormal tax on the portion of net income that is taxable at regularrates.

Line 16 is added to reflect the breakdown of the computation ofnormal tax on the total net income subject to normal tax from thereturn or Schedule CO Individual, as applicable.

Schedule B Individual

In Part I, several non-current credits are eliminated and reorderthose that are still in force. On the other hand, in Part IV areadded new credits provided under Act 60-2019.

Schedules B2, B2.1, and B2.2 Individual

These schedules are provided to determine the AmericanOpportunity Tax Credit. Schedule B2 Individual was modifiedto meet the specifications of the Federal Government, includingadditional information like student's social security number andthe employer identification number of the educational institution.In addition, Part III was added for the taxpayer, to certify thatthe student complies with all the eligibility criteria to be able toreceive this credit.

The new Schedules B2.1 and B2.2 Individual are provided toclaim retroactively, as qualified, the reimbursable creditcorresponding to taxable years 2018 and 2019.

Schedule B3 Individual

This new schedule is provided to claim or reconcile the creditfor the Economic Impact Payment granted under the federallaws to provide help and relief because of COVID-19.

Schedule C Individual

In Part I, line 2(c), it is provided to breakdown the deductionsand exemptions not directly related to the income from sourcesoutside of Puerto Rico.

In Part II, it is provided to indicate the type of form in which thetax paid to the United States, its states, territories, possessions,and foreign countries, is reported.

A new Part III is added to determine any reduction applicable tothe tax paid or accrued that is claimed as a credit in this schedule.

Part V is added to determine the total credit attributable to long-term capital gain of resident individuals investors.

Schedule CO Individual

This schedule is organized in parts: Part I-Determination of theIndividually Adjusted Gross Income; Part II-Determination ofNet Taxable Income; Part III-Determination of Tax; and PartIV-Computation of Allowable Amounts of Deductions toNonresidents or Part-Year Residents.

In Part I, lines 1 and 2, rows related to withholding statementunder Act 14-2017, are renamed, so that they read "Total ofwithholding statements with this schedule under a qualifiedphysician decree" and "Total of W2 with this schedule under aqualified physician decree", respectively.

In Part I, line 3, additional space is provided in various items ofother income (losses) to indicate the total gross income received,as applicable, to the taxpayer and spouse.

In Part II, lines 1 and 2, shall be transferred the total deductionsapplicable to individual taxpayers, attributable on a 50% basis,and individually alocated. The breakdown of these items isincluded in Schedule A Individual.

Schedule D Individual

It is provided in Part II, lines 12 and 13, to identify lump-sumdistributions from annuity contracts as variable or fixed. Inaddition, exempt income is included in Column B of Part IV.

Schedule DDC Individual

This new schedule is provided, Due Diligence Checklist byAccredited Agent-Tax Returns Specialist, as an option to certifycertain expenses that are claimed in the income tax return ofindividuals engaged in trade or business with volume ofbusiness less than $1 million.

RELEVANT FACTS

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partnerships, special partnerships, corporations of individualsand subsidiary pass-through entities.

Schedule R1 Individual

It is provided to indicate the distributable share on gross incomefrom services rendered and in the business volume ofpartnerships, special partnerships, corporations of individualsand subsidiary pass-through entities, as applicable.

Schedule X Individual

This schedule is modified to bring it into line with provisions ofSection 1021.06 of the Code, related to the optional tax to self-employed individuals.

EVIDENCE OF THE RETURNYou do not have to include with the return the evidencecorresponding to the deductions and exemptions fordependents. However, you must keep such evidencefor at least 6 years, in case they are required as part of aninvestigation or audit procedure. In such cases, if you do notpresent the evidence, your return may be adjusted and thecorresponding interests and surcharges will be assessed overany balance of tax due.

Those taxpayers who complete and file their returns through acertified program, will have to submit all the required evidencethrough SURI. Said evidence must be submitted after havingfiled electronically the return, but not later than the following dayto the due date prescribed by the Code to file it, includingextensions. In those cases where the taxpayer file after the duedate of the return, the evidence must be submitted the followingday to the electronic filing of the return. Refer to CC RI 21-06 fordetails of the process to submit the evidence.

Taxpayers who use SURI to prepare and file his/her returnmust upload the required evidence as part of the filing processof the return.

DEPENDENTSThe term dependent means any of the following persons whofor the calendar year in which the taxpayer’s taxable yearbegins have received from the taxpayer more than half ofthe support:

i. A person who at the end of the calendar year in which thetaxpayer's taxable year begins has not reached the age oftwenty-one (21);

ii. The taxpayer’s father or mother;

iii. Is age sixty-five (65) or older;

iv. Has reached the age of twenty-one (21) or more and isblind or incapable of self-support because of being mentallyor physically disabled; or

v. A person who at the end of the calendar year in which thetaxpayer’s taxable year begins has not reached the ageof twenty-six (26), as long as he/she have attended postsecondary level education, as a regular student, in auniversity or technical-professional institution recognizedas such by the educational authorities of Puerto Rico, or ofthe applicable country, until he/she receives his/heruniversity or technical-professional degree.

SOCIAL SECURITY NUMBER

Enter your social security number in the correspondingspace of the return and its schedules. This number is veryimportant because it is necessary to process your return.

PAYMENTS FOR THE PREPARATION OF THE RETURNAND SANCTIONS TO RETURNS SPECIALISTS

Indicate if you paid for the preparation of your returnand make sure that the specialist signs the return and

Schedule F Individual

A line is provided in Part I to transfer, from Schedules D1 andD3 Individual, distributions from Individual Retirement Accountspreviously used to acquire your principal residence. Also,Column B of Parts II, III and IV, provides to include exemptincome.

Schedule F1 Individual

This schedule is renamed as "Detail of Income of ResidentIndividual Investors ".

Schedule H Individual

This schedule is renamed as "Income from Annuities or PensionsReceived in the Form of Periodic Payments". The informationin the header is reorganized and it is provided to identify theform in which the pension or annuity is reported.

Schedule IE Individual

Lines 8 through 11 are added in Part I to reflect thecompensations, payments, or distributions due to a disasterdeclared by the Governor of Puerto Rico reported or not in awithholding statement or informative return (previously reportedin Part II), as well as the amount received for any subsidy orstimulus paid by the Federal Government or the Governmentof Puerto Rico because of COVID-19, respectively. Line 12 isalso included to report interest upon mortgages on residentialproperty located in Puerto Rico granted after January 1, 2014.

In Part II, line 5 is added to include exempt interests distributedfrom an IRA or Educational Contribution Account. Also wererelocated from Part I to Part II, line 10, the amounts paid by anemployer for reimbursement of travel, meals, lodging,entertainment, and other expenses.

Line 31 provides to identify the concept of income derived byyoung people from wages, services rendered, self-employmentor new business with special agreement under Act 135-2014.In addition, line 37 is added to reflect separately income fromresidential rent under Act 132-2010.

New lines 38 to 42 are provided to inform the exempt incomefrom Schedules J, K, L, M and N Individual, respectively.

Schedules J, K, L, M and N Individual

Space is provided in Part I to indicate the number of schedulesby industry or business that are included with the return. Inaddition, the list of tax incentives acts was updated in each of theschedules.

In Part II certain items of operating expenses and deductionswere reorganized and added, also it is provided to indicatewhether the expenses claimed under Other Deductions (SectionC of Part III) are validated with the due diligence checklist byAccredited Agent-Tax Returns Specialist form (Schedule DDCIndividual), in this case, you must indicate the Accredited Agent-Specialist Number in the space provided for this purpose in theQuestionnaire.

Schedule K Individual provides on line 1, Part II to includeincome from construction works generated by owners ordevelopers of construction projects. It is also provided on line5, Part IV to include the gain taxable at a reduced rate under anIncentive Act.

Schedule M Individual provides on line 4, Part IV to include theamount or percentage of exemption with respect to the adjustednet income from services rendered.

Schedule R Individual

This schedule is restructured to be used as reconciliationstatement of all Schedules R1 Individual submitted by thetaxpayer and to reflect the distributable share in the grossincome from services rendered and in the business volume of

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includes his/her registration number. THE CODEPROVIDES CIVIL AND CRIMINAL SANCTIONS TO THOSESPECIALISTS WHO FAIL TO SUBMIT THISINFORMATION OR WHO DO NOT MEET OTHERSTATUTORY REQUIREMENTS IMPOSED BY THE CODE.

CHANGE OF ADDRESS

To notify a change of address at the moment of filing thereturn, you must write the new address clearly and legibly in thespace provided for this purpose in the return’s heading. Also, youmust select the oval ( ) beside “Yes” in the space provided toindicate if there was a change of address.

You can also change your address at any time of the yearthrough your SURI account following the steps listed below: (i)Login to your account in SURI; (ii) In the Names and Addressesmenu, select the address you want to change and click the linkChange this address; (iii) Enter the new address and click thelink Validate the address; (iv) Once the address is validated,click on Next to continue with the next screen; (v) On the Reviewand Submit screen, be sure to click on the link Submit. Thesystem will provide you a confirmation number of the request tochange the address. We recommend you to keep this number inyour records.

If you do not have a SURI account, and you do not have to filethe return yet, you must notify any change of address usingForm SC 2898 (Change of Address). You may obtain this formthrough our webpage: www.hacienda.pr.gov.

AREA CODE

You must indicate the area code (787 or 939) in the spaceprovided in the heading of the return to write the phone numberof your residence and work.

RETURNED CHECKS

Every returned check drawn on behalf of the Secretary of theTreasury will be subject to a $25 minimum charge. This chargeis in addition to any other interests, surcharges or penaltiesprovided by the Code or any other fiscal act for omissions infulfilling your tax responsibility. The Department may make thecollection in a traditional or electronic manner.

ELECTRONICALLY FILING THE TAX RETURN

You must file your Income Tax Return electronically throughSURI or using any program or application certified by theDepartment. For additional information, see our website:www.hacienda.pr.gov.

If you request direct deposit of your refund into your checking orsavings account, be sure that the correct information has beenentered in the corresponding screen of the certified program orapplication used to file your return electronically.

DIRECT DEPOSIT OF REFUND

You can receive your refund faster and safely. The Departmentof the Treasury can deposit your refund directly into yourchecking or savings account.

To authorize the Department of the Treasury to deposit yourrefund directly into your account, you must meet the followingrequirements:

Complete the Authorization for Direct Deposit ofRefund

Type of Account - Indicate if the deposit will be made into yourchecking or savings account, by selecting the oval that identifiesthe type of account.

Routing/Transit Number - Enter the routing/transit number ofyour account. This information appears on the check (see ExampleA). In the case of a savings account, you must contact the financialinstitution to obtain the routing/transit number. Do not leave blankspaces. Do not use hyphens or other symbols.

Account Number - Enter your checking or savings accountnumber (see Example A). Do not use hyphens or othersymbols. Do not fill out blank spaces with zeros. The accountnumber may have less numbers than the spaces provided forthis purpose in this part.

Account in the name of - Enter your name, as it appears onyour account. In the case of married taxpayers filing jointly, theaccount must be in the name of both spouses.

SAMPLEJohn DoeJane DoeCalle Principal # 19Ponce PR 00731 ______________

0249

PAY TO THEORDER OF

ANY BANKAny Place, Ponce PR 00731

FOR

DOLLARS

$

Do not include thecheck number

T

Routing/ TransitNumber

Account Number

EXAMPLE A

AUTHORIZATION FOR DIRECT DEPOSIT OF REFUNDType of account

Checking SavingsRouting/Transit Number Account Number

Account in the name of: __________________________________________________________ and ______________________________________________________________Depo

sit

Jane DoeJohn Doe

42 1 60 0 1 2 4 0 1 2 2 4 4 004

(Print complete name as it appears on your account. If married and filing jointly, include your spouse's name)

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In the case of married taxpayers filing jointly, thereturn must be signed by both spouses.

All the information requested must be completed.Otherwise, the financial institution and theDepartment of the Treasury may reject the transaction.

The account must be in a participating financialinstitution. You must verify this information directlywith the financial institution.

PAYMENT METHODSPayments shall only be made by electronic means throughSURI. The available payment methods to make any transactionin SURI are the following: 1) credit card (Visa or MasterCard),2) ACH Debit (Direct debit), and 3) ACH Credit.Refer to the Internal Revenue Informative Bulletin No. 20-03:Payment Methods Accepted in Transactions through the InternalRevenue Integrated System, for additional information aboutpayment methods through SURI.If an electronic debit is authorized through one of the certifiedprograms or applications, you must enter the amount on line3(a) page 1 of the return. Remember to enter in thecorresponding screen of the certified program the accountnumber information and route and transit number needed toperform the electronic debit.

OVERPAYMENT APPLICATION

Any overpayment will be applied against any enforceabletax liability imposed by the Code. If married and one of thespouses owes taxes, the overpayment will be applied toany enforceable debt.

RETENTION OF REFUND FOR THE CONCEPT OFCHILD SUPPORT

If you are a parent who has the obligation to provide childsupport payments to your children through the Child SupportAdministration (ASUME) and you owe said child support, yourrefund may be withheld. If you understand that such retentiondoes not apply, you will have 10 days from the date of thenotification to object the same at the ASUME office nearest toyour residence.

FEDERAL EMPLOYEES - Exemption of the Cost ofLiving Allowance (COLA)

The COLA received by civilian employees of the FederalGovernment is tax exempt up to the amount exempt under theFederal Internal Revenue Code. Nevertheless, the Departmentmay revoke the privilege granted for the exemption if it isdetermined that the taxpayer did not comply with his/her taxresponsibility at any moment. In that case, the taxpayer musthave to pay the amount due with the corresponding interests,surcharges and penalties. The taxpayer must include with thetax return the required information of the W-2 Form.

PROVISIONS APPLICABLE TO CERTAIN MILITARYPERSONNEL

Exemption from Income

Any compensation received from active military servicerendered by military personnel in a combat zone designatedas such by the President of the United States is exempt from thepayment of income tax. This exemption shall not apply to militarypersonnel transferred outside of Puerto Rico to replace militarypersonnel sent to the combat zone.

Extension of Time to File

A 10-month extension to file the income tax return shall begranted to any taxpayer who has been activated andtransferred to render military services outside of Puerto Rico

during any warlike conflict. Said extension shall be grantedfrom the date in which the taxpayer ceases in the active militaryservice. To enjoy this benefit you should:

1. File the return within 10 months from the date in which youceased in the active military service.

2. Indicate in question G of the Questionnaire of the return’sfirst page, if you were an active military in a combat zoneduring the taxable year and the date on which you ceasedservice.

3. Attach to the return the military orders showing your transferoutside of Puerto Rico, your stay in a warlike conflict, andthe date of your return.

If you file the return following the above requirements, theextension shall be considered as granted.

Extension of Time to Pay

A 10-month extension to pay the tax shall be granted to everytaxpayer that during any warlike conflict is activated andtransferred to render military service outside of Puerto Rico.Such extension shall be granted from the date in which thetaxpayer ceases in the active military service.

Also, the tax declared on the return which payment has beenextended, shall be exempt from the payment of interests.

For more details, please refer to Section 6080.16 of theCode.

360° TAXPAYER’S SERVICE CENTERS

In the 360° Service Centers, besides informing about thestatus of your refund, other services are offered such as:Tax Return Filing Certifications, Return Copies, assistance forCases of Inheritance and Donations, Individuals, Corporationsor Partnerships and Professional Services Withholding Waivers.

Following are the telephone number of the "HaciendaResponde" Contact Center and the location of each one of our360° Service Centers:

"Hacienda Responde" Contact CenterTelephone: (787) 622-0123

San Juan 360° Services CenterIntendente Ramírez Building10 Paseo Covadonga, Office 101

San Juan 360° Services Center -Representative's CenterIntendente Ramírez Building10 Paseo Covadonga, Office 101

Arecibo 360° Services CenterSantiago Cabán Building158 Mariano Vidal St., 1st Floor

Caguas 360° Services CenterGovernmental Center, BasementGoyco Street, Acosta Corner

Mayagüez 360° Services CenterGovernmental Center50 Nenadich Street, Office 108

Cidra 360° Services CenterCity Hall Annex Building33 Muñoz Barrios St.

To ensure the health and safety of our taxpayers, the Departmenthas established a controlled system to serve taxpayers throughtechnological platforms, telephone, email and an appointmentsystem and shifts through Turnos PR App in our website

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www.hacienda.pr.gov or at www.hacienda.turnospr.com. Onthe other hand, to make transactions and obtain online services,you may access our SURI digital platform atsuri.hacienda.pr.gov. In addition, the taxpayer who do not havean account in SURI and require assistance, can write to us in asafe way through the link "SURI Assistance", available on theSURI home page.

TECHNICAL ASSISTANCE

For additional information on the technical contents of this bookletor to clarify any doubts, please call (787) 622-0123, optionnumber 8 in the directory or send a message throughyour SURI account .

HACIENDA MAKING CONNECTION

Access the Department of the Treasury’s website at:www.hacienda.pr.gov. Here you can find information about thefollowing services, among others:

Preparation, filing and electronic transfer of the IndividualIncome Tax Return through SURI using programs orapplications certified by the Department

Preparation of 2020 Withholding Statements and InformativeReturns through SURI

Preparation and filing of the Employer's Quarterly Return ofIncome Tax Withheld through SURI

Preparation and filing of the Quarterly Return of IncomeTax Withheld on Payments for Services Rendered throughSURI

Puerto Rico Internal Revenue Code of 1994, as amended

Puerto Rico Internal Revenue Code of 2011, as amended

Forms, Returns and Informative Booklets, such as:. Income Tax Return of Taxable Corporations. Form AS 2909.1 - Tax Return Specialists Authorization

for the Electronic Filing and Digital Signature of theIndividual Income Tax Return. Form AS 2909.1A - Tax Return Specialists Authorizationfor the Electronic Filing and Digital Signature of theCorporation Income Tax Return

. Modelo SC 2800 - Planilla de Contribución sobreCaudal Relicto (Spanish only)

. Modelo SC 2800 A - Planilla Corta de Contribuciónsobre Caudal Relicto (Spanish only)

. Modelo SC 2800 B - Planilla de Contribución sobreCaudal Relicto (Aplica a causantes fallecidos a partirdel 1 de enero de 2011 hasta el 31 de diciembre de2017) (Informative) (Spanish only)

. Modelo SC 2800 C - Planilla Informativa de Contribuciónsobre Caudal Relicto (Aplica a causantes fallecidos apartir del 1 de enero de 2018) (Informative) (Spanishonly)

. Modelo SC 2788 - Planilla de Contribución sobreDonaciones (Spanish only)

. Modelo SC 2788 A – Planilla de Contribución sobreDonaciones (Aplica a donaciones efectuadas a partirdel 1 de abril de 2011 hasta el 31 de diciembre de2017) (Informative) (Spanish only)

. Modelo SC 2788 B - Planilla Informativa de Donaciones(Aplica a donaciones efectuadas a partir del 1 de enerode 2018) (Informative) (Spanish only)

. Informative Booklet to Provide Guidance on theIncome Tax Responsibilities of Federal, Military andOther Employees

. Folleto Informativo de Contribución sobre Ingresosde Sacerdotes o Ministros (Spanish only)

. Folleto Informativo para Aclarar sus Dudas sobreAspectos Contributivos en la Venta de CiertasPropiedades Inmuebles (Spanish only)

. Withholding of Income Tax at Source on Wages -Instructions to Employers (Spanish and English)

. Folleto Informativo - Responsabilidad personal porviolaciones al Código de Rentas Internas de 2011,según enmendado (Spanish only)

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SUGGESTIONS TO AVOID MISTAKES WHEN FILING YOUR RETURN1. Write all the required information and select the applicable ovals.

2. Make sure to write your social security number on the return and schedules.

3. Verify that your social security number is the one shown on the Withholding Statements and Informative Returns.

4. Make sure to include your date of birth and that of your spouse (if applicable).

5. Notify your change of address by writing the new address in the space provided for this purpose in the heading of the return.

6. In the case of a married couple filing jointly, the return may be filed under the name of any of the spouses.

7. Do not include estimated tax payments or excess tax paid in previous years credited to estimated tax in Part II of Schedule BIndividual. Said amounts must be included in Part III of said Schedule.

8. Married couples who choose the optional computation of tax in the case of married individuals living together and filing a joint return(optional computation), must make sure to select the oval provided in the Questionnaire of the return and to include Schedule COIndividual. On the other hand, if you are a marriage couple in which both or one of the spouses choose the optional tax underSection 1021.06 of the Code, you must make sure to select the corresponding ovals in the Questionnaire of the return and inSchedules CO and X Individual, and include said schedules with your return.

9. Include with your return the information required of all Withholding Statements or Informative Returns (Forms499R-2/W-2PR, W-2, 480.6A, 480.6B, 480.6SP or 480.7C, among others).

10. Contributions made to Qualified Plans of private company employers (Box 15, Withholding Statement) or to a GovernmentalRetirement Fund (Box 14, Withholding Statement) are excluded from the salaries (Box 11). Therefore, do not consider themagain as a deduction.

11. Complete on Schedule A1 Individual all the information related to your dependents and beneficiaries of educational contributionsand my future accounts.

12. Do not include your spouse on Schedule A1 Individual. For tax purposes, a married taxpayer cannot include his/herspouse as a dependent.

13. Sign electronically your return and in the case of a joint return, make sure that the return is signed by both spouses.

ADDITIONAL CHILD TAX CREDIT FOR BONA FIDE RESIDENTS OF PUERTO RICO(Benefit provided by the Federal Government to qualified residents of Puerto Rico)

The U.S. Self-Employment Tax Return (Including the Additional Child Tax Credit for Bona Fide Residents of Puerto Rico) (Form1040-SS) allows you to claim the Additional Child Tax Credit, if you comply with the following requirements:

you are a bona fide resident of Puerto Rico;you made contributions to Social Security or Medicare from your salaries or paid the U.S. self-employment tax; andyou have three (3) or more children under the age of 17.

For additional information and free assistance through the Volunteer Income Tax Assistance Program Centers(VITA), contact the Internal Revenue Service at (1) (800) 829-1040.

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INSTRUCTIONS TO COMPLETE THE RETURNTAXPAYER MOVED TO PUERTO RICO DURING THE YEAR

If you were a resident of another country and changed yourresidence to Puerto Rico during the taxable year, you mustinform the Government of Puerto Rico the total income receivedfrom the date of the residence change until the end of yourtaxable year and the income from sources within Puerto Ricoreceived while not residing in Puerto Rico.

A taxpayer’s residence is determined based upon the facts andcircumstances of each case. Generally, an individual isconsidered a bona fide resident of Puerto Rico if he/she isdomiciled in Puerto Rico. It shall be presumed that an individualis a resident of Puerto Rico if he/she has been present inPuerto Rico for a period of 183 days during the calendar year.However, if his/her intention regarding to his/her stay is merelytemporary and meets other requirements, even when he/shehad been in Puerto Rico 183 days or more, he/she may not beconsidered a bona fide resident of Puerto Rico.

The income from sources outside of Puerto Rico received byan individual attributable to the period when he/she was not aresident of Puerto Rico is not taxable in Puerto Rico. Therefore,deductions attributable to the amounts so excluded from thegross income will not be allowed.

Nonresident individuals will be taxed in Puerto Rico only ontheir income from sources within Puerto Rico.

Likewise, if the individual changes his/her residence from PuertoRico to the United States or a foreign country, he/she will includeon the Puerto Rico income tax return all the income earned untilthe date he/she changed his/her residence to the United Statesor a foreign country, regardless of the source of said income.Also, he/she will include on his/her Puerto Rico income taxreturn, the income from sources within Puerto Rico earnedafter the change of residence.

Be sure to complete questions B and C of theQuestionnaire on page 1 of the return.

NAME, ADDRESS AND SOCIAL SECURITY NUMBER

Write the required information in the spaces provided.

It is important that you write your social security numberin the corresponding box of the return and schedules.This number is necessary to process your return.

ELECTRONIC ADDRESS (E-MAIL)

Include an electronic mail address in the space provided forthis purpose.

AMENDED RETURN

If after filing your original return, you find out that you omittedsome income, did not claim a certain deduction or credit, orclaimed a deduction or credit for which you do not qualify, youmust amend the return. Select the oval corresponding toAmended Return. You must submit a detail explaining whyyou are amending the return.

Such return must be filed within 4 years from the date the originalreturn was filed.

CHANGE OF ADDRESS

If there was a change of address at the moment of filing thereturn, select the corresponding oval and write clearly andlegible your new address. This allows us to keep our recordsup to date and send you any notice to the correct address.

EXTENSION OF TIME REQUESTED

Select the corresponding oval to indicate if an Extension ofTime to File the Income Tax Return (Form AS 2644) was filed.

If for any reason you understand that you will not be able to fileyour return on time, you shall request an automatic extensionof time no later than the due date to file the return. The requestwill be filed electronically, through SURI, using Form AS 2644.If you file this form on time, the extension will be grantedautomatically for a period of 6 months. Filing an extension oftime does not extend the time for payment of any taxdue with the return.

In case of military personnel active in combat zone, refer toRELEVANT FACTS.

TAXPAYER DECEASED DURING THE TAXABLE YEAR

If a taxpayer dies during the taxable year, the administrator orrepresentative must file an income tax return including the incomederived until the date of death, on or before the 15th day of thefourth month following the date of death. Such return shall besigned by the administrator or representative. If the taxpayerwas married and living with his/her spouse, two returns will befiled: one including both spouses’ income from January 1st tothe date of death, and another with the surviving spouse’sincome for the remaining months of the year.

The personal exemption on the first return will be married livingwith spouse. On the second one, the surviving spouse canclaim the personal exemption he or she is entitled to at the endof the taxable year.

On the first return, select the oval that indicates deceasedduring the year. Indicate the date of death and keep for yourrecords copy of the Death Certificate. On the second return,select the oval that indicates surviving spouse files anotherreturn for the taxable year and include the social securitynumber and date of death of the deceased spouse. Both ovalsare located at the top right side of the return.

CONTRACTS WITH GOVERNMENTAL ENTITIES

If you or your spouse have a contract with agovernmental entity, select the corresponding oval inthe Questionnaire, page 1 of the return.

Every person, natural or juridical, contracted by a governmentalentity, must comply with Executive Order 91-24, as amended,and the provisions of the Department's Circular Letters in forceat the time of processing the contracts. According to saidprovisions, every contract subscribed by a governmental entitymust include a clause to certify that the contracted party filed theincome tax returns for the last five years, and that the income,property, unemployment, temporary disability and drivers’ socialsecurity taxes, whichever applies, have been paid.

In addition, in order to approve a contract or purchase order,the governmental entity must require the tax return filing (FormSC 6088) and debt (Form SC 6096) certifications from theInternal Revenue Area of this Department, the property taxcertification from the CRIM and the corresponding certificationfrom the Department of Labor and Human Resources. Thesedocuments must be requested annually.

Since sometimes the tax return for the last filing year cannot becertified because the return has not been processed by theDepartment, it is recommended that at the moment of filing thereturn, you print a copy of the electronically filed return with theDepartment's electronic filing stamp.

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QUESTIONNAIRE

In question A, select the corresponding oval to inform if you area United States citizen. Those taxpayers who are not citizensof the United States, but exclusively for tax purposes aretreated as such because of a treaty, a court decision, or forhaving a United States Permanent Resident Card, ISCIS FormI-551, also known as "Green Card", must answer "Yes" in thisquestion in order to be entitled to the corresponding deductionsand exemptions.

Select the corresponding oval in question B to indicate if youwere a resident of Puerto Rico during the entire taxable year.If you were not a resident during the entire taxable year, selectthe oval that describes your residence status for the taxableyear.

In the case that you had moved to or from Puerto Rico, indicatethe date on which the moving took place and include in questionC the total income generated by the taxpayer and spouse, asapplicable, before or after being considered residents of PuertoRico.

If you were a nonresident of Puerto Rico during the entire year,select the oval of nonresident during the entire year. Include inquestion C the total income generated during the year fromsources outside of Puerto Rico.

Income included in question C will not be subject to the paymentof income tax in Puerto Rico, but will be used to compute thelimitation of the deductions applicable to individual taxpayersincluded on Schedule A Individual or Schedule CO Individual,as applicable. This amount shall be transferred to line 2, Part IIof Schedule A Individual or line 2, Part IV, Column B or C, asapplicable, of Schedule CO Individual.

Also, you must inform in question D if you received excluded ortax exempt income during the year (Example: social securityincome, prizes from the Lottery of Puerto Rico or from racetrackwinnings). Submit Schedule IE Individual including suchincome.

In question E, you must also indicate if you are a residentindividual investor. Submit Schedule F1 Individual. Youmust inform in question F if you are a partner of a partnershipsubject to tax under the Federal Internal Revenue Code. Youmust include on Schedules R and R1 Individual yourdistributable share on such partnership’s income, expenses,gains or losses.

Indicate also in question G if during the taxable year you werestationed as an active military in a combat zone. If you answered“Yes”, include the date on which you ceased service in thecombat zone.

The taxpayer must include with the return the military ordershowing his/her transfer outside Puerto Rico, his/her stay in awarlike conflict and the date of the return.

You must indicate in question H, if you or your spouse arequalified physicians under Act 14-2017, as amended, or underAct 60-2019, and include the number of the decree approvedby the Secretary of the Puerto Rico Department of EconomicDevelopment and Commerce.

Indicate in question I if you choose the optional tax to selfemployed individuals engaged in trade or business underSection 1021.06 of the Code. Submit Schedule X Individual.

As provided in Section 1021.06 of the Code, to qualify for theOptional Tax, the individual must meet the following requirements:

• The income received must be substantially from servicesrendered. For these purposes, the earned income will beconsidered substantially from services rendered when saidcategory of income represents at least eighty percent (80%) ofthe total gross income received during the taxable year, and

• All income received must be subject to the withholding ofincome tax at source provided in Section 1062.03 of theCode or to the payment of estimated tax, as set forth inSection 1061.20 of the Code applicable to individuals.

As a general rule, the election to qualify for the optional tax isdone annually with the return. However, in the case of taxpayerswho chose the optional tax through the Partial Waiver Certificategranted under Section 1062.03(g)(5) of the Code, they arerequired to determine their tax as provided in Schedule XIndividual of the return, as long as their earned income fromservices rendered represents eighty percent (80%) or more ofthe total gross income received during the taxable year. However,if the income from services represents less than eighty percent(80%) of total gross income, the taxpayer cannot use the optionaltax and he/she will be subject to the regular tax rates.

HIGHEST SOURCE OF INCOME

Select the corresponding oval in accordance with your highestsource of income.

FILING STATUS AT THE END OF THE TAXABLE YEAR

Select the oval that identifies your filing status at the end of thetaxable year:

1) Married - This filing status is for every individual that at theend of the year is legally married and living together withhis or her spouse.

However, those individuals that, before their marriage,executed a prenuptial agreement expressly stipulating thatthe economic regime of the married couple is one of completeseparation of property, will not be considered married forincome tax purposes. Consequently, each spouse will betaxed separately as an individual taxpayer for incometax purposes.

If your spouse died during the year and you did not remarryin said year, you must file a return as married living withspouse up to the date of the death, and another as individualtaxpayer, from the date of the death up to the end of theyear. You must submit your spouse’s name andsocial security number.

If you choose the optional computation of tax in thecase of married individuals living together and filing ajoint return, select the corresponding oval and go toSchedule CO Individual.

2) Individual Taxpayer - This filing status is for thoseindividuals who at the end of the taxable year:

a) are not married, because they have never married,are widowed or divorced; or

b) are married, but, before their marriage, executed aprenuptial agreement expressly stipulating that theeconomic regime of the married couple is one of completeseparation of property (you must provide yourspouse’s name and social security number); or

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c) are married, but not living with the spouse. Anindividual will be considered as not living with his/herspouse if at the end of the taxable year, he or she didnot live with the spouse, and during an uninterruptedperiod of 12 months that includes the date of the endof the taxable year, he or she did not live in the samehousehold as the spouse during an uninterruptedperiod of 183 days. You must provide yourspouse’s name and social security number.

3) Married filing separately - This filing status is for individualsthat at the end of the taxable year are legally married, livingtogether, and choose to file separately. If you file under thisstatus, you should include your own income as providedunder Section 1021.03 of the Code. Also, the exemptionfor dependents and certain deductions must be allocated50% to each spouse and others may be claimed fully bythe spouse to whom they relate. You must provide yourspouse’s name and social security number.

OPTIONAL COMPUTATION OF TAX

If you choose the optional computation of tax in the case ofmarried individuals living together and filing a joint return, selectthe corresponding oval in the married filing status. Do notcomplete Parts 1 and 2 or lines 14 to 21 of Part 3, page 2 of thereturn. Go to Schedule CO Individual and refer to theinstructions of said Schedule. On the other hand, if under thiscomputation one of the spouses choose the optional tax (Section1021.06 of the Code), do not complete Part 2 or lines 14 through22 of Part 3 of the return and complete, as applicable, SchedulesX and CO Individual.

OCCUPATION

Inform the nature of your and your spouse’s occupation. Inorder to facilitate the description of the activity in which you areengaged, enter the code that better describes it using theOccupational Codes List provided on page 82.

REFUND

Line 1 – Amount Overpaid

An overpayment of tax or refund arises when the total taxwithheld, paid and refundable credits, including any amountpaid with the automatic extension (if any) exceeds the taxdetermined. This amount comes from Part 3, page 2 of thereturn and arises when line 29 is more than the sum of lines 28and 30.

Any overpayment of income tax requested to berefunded will be applied against any enforceable taxliability imposed by the Code.

If you are married and one of the spouses owes tax, the taxoverpayment shall be credited against any enforceable tax liability.

In the absence of liability from previous years, you may elect tocontribute all or part of the overpayment of tax to the 2021estimated tax, the San Juan Bay Estuary Special Fund or theSpecial Fund for the University of Puerto Rico.

If you elect to do so, enter the amount that you want to credit to yourestimated tax for the taxable year 2021 on line 1A, or the amountyou wish to contribute to any of these Funds on lines 1B and 1C,respectively. Enter any balance to be refunded on line 1D.

You must keep for your records evidence of the estimated taxpayments (copy of canceled or substitute checks, money orders,etc.).

PAYMENT

Line 2 – Amount of Tax Due

If the tax determined exceeds the total tax withheld, paid,refundable credit and amount paid with the automatic extension(if any), there is a total tax due. This amount comes from Part 3,page 2 of the return and results when line 29 is less than thesum of lines 28 and 30.

Line 3 - Amount paid

You may pay your tax by direct debit (ACH Debit) throughSURI or when you use any of the programs or applicationscertified by the Department. If an ACH Debit is authorizedthrough a certified program or application, you must enter theamount on line 3(a). Remember to enter in the correspondingscreen of SURI or the certified program the information of theaccount number and routing/transit number necessary to makethe ACH Debit.

For additional information about payment methods fortransactions in SURI, refer to Internal Revenue Bulletin No.20-03: Payment Methods Accepted in Transactions throughthe Internal Revenue Integrated System.

If you are not required to make estimated tax payments, youmay elect to pay the total tax due (line 2) in two equalinstallments. The first installment must be paid no later than thedate established by the Code to file the return (April 15, whenthe return is filed on a calendar year basis) and the secondinstallment must be paid on or before the 15th day of the sixthmonth following that date (October 15, when the return is filedon a calendar year basis). You will lose the option to paythe tax in two installments if you do not include withyour return at least half of the tax balance due.

If you made a payment with your automatic extension requestand it was less than 50% of the balance of the tax due determinedafter subtracting withholdings and credits (Line 26 less lines27A through 27D of Part 3), you must pay with the return theamount of tax due (Line 2, page 1). Interests and surchargeswill be assessed on this amount from the original due date of thereturn to the date of payment.

If you made a payment with your automatic extension request onor before the date in which you should have filed the return, andthe payment made with said request was 50% or more of thebalance of tax due determined after subtracting withholdings andcredits (Line 26 less lines 27A through 27D of Part 3), you areentitled to the two installments payment option. This means that nopayment is required when filing the return. The second installmentis due on or before October 15, if you file your return on a calendaryear basis. If you file on a fiscal year basis, the second installmentis due on the fifteenth day of the sixth month following the due dateto file the return.

If you decide to pay the tax due in two installments, enter theamount you are paying with your return on line 3(a).

INTERESTS, SURCHARGES AND PENALTIES

Interests

The Code provides for the payment of interests at a 10% annualrate over any tax balance that is not paid by its due date.

Surcharges

When the payment of interests is applicable, a 5% surcharge ofthe amount due will be assessed, if the delay in paymentexceeds 30 days, but not 60 days; or 10% of the amount due,if the delay exceeds 60 days.

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Penalties

The Code imposes a progressive penalty from 5% to 25% ofthe total tax for late filing unless you can show reasonablecause for the delay.

Also, any person required under the Code to file a return,declaration, certification or report, who voluntarily fails to filesuch return, declaration, certification or report within the term orterms required by the Code or regulations, in addition to otherpenalties, shall be guilty of a misdemeanor.

If any person voluntarily fails to file the abovementioned return, declaration, certification or report(within the terms required by the Code or regulations)with the intention to avoid or defeat any tax imposed bythe Code, in addition to other penalties, he or she shallbe guilty of a third degree felony.

Line 4 - Balance of Tax Due

This is the amount of tax due after applying payments madewith the return and adding any interest, surcharge or penaltythat may be applicable.

If you do not have obligation to pay estimated tax and youchoose to pay your return in two equal installments, this amountmust be equal to or less than 50% of the amount of tax due(Line 2, page 1 of the return). In these cases, this amount mustbe paid no later than October 15 or, if you file on a fiscal yearbasis, no later than the fifteenth day of the sixth month followingthe date in which the return must have been filed.

Remember that if you are required to pay estimated taxes,you must pay the total amount of tax due (line 2) nolater than the date in which the tax return must be filed.

DEPOSIT

Authorization for Direct Deposit of Refund

You can receive your refund faster and safely. The Departmentof the Treasury can deposit your refund directly into yourchecking or savings account. To authorize the Department ofthe Treasury to deposit your refund directly into your account,you must fill out this part.

Type of Account - Indicate if the deposit will be made into yourchecking or savings account, by selecting the ovalcorresponding to the type of account.

Routing/Transit Number - Enter the routing/transit numberof your account. This information appears on the check. In thecase of a savings account, you must contact the financial institutionto obtain the routing/transit number. Do not leave blankspaces. Do not use hyphens or other symbols.

Account Number - Enter the checking or savings accountnumber. Do not use hyphens or other symbols. Do not fillout blank spaces with zeros. The account number may haveless numbers than the spaces provided for this purpose in thispart.

Account in the Name of - Enter your name, as it appears onyour account. In the case of married taxpayers filing jointly, theaccount must be in the name of both spouses.

The account must be in a participant financialinstitution. You must verify this information directly withthe financial institution.

For additional information, please refer to RELEVANT FACTS- DIRECT DEPOSIT OF REFUND.

SIGNATURE OF THE RETURN

The return will not be considered filed and will not beprocessed unless it is electronically signed and allnecessary documents and information are submittedthrough SURI. In the case of married individuals filingjointly, both spouses must sign the return electronically.

PAYMENT FOR THE PREPARATION OF THE RETURN

Indicate if payments were made for the preparation ofthe tax return and make sure that the specialist signsthe return electronically and includes his/her specialistregistration number. THE CODE PROVIDES CIVIL ANDCRIMINAL SANCTIONS TO THOSE INCOME TAX RETURNSPECIALISTS WHO FAIL TO SUBMIT THISINFORMATION OR WHO DO NOT MEET ANY OTHERSTATUTORY REQUIREMENTS IMPOSED BY THE CODE.

The specialist must declare under penalty of perjury that he/sheexamined the return, and to the best of his/her knowledge andbelief the return is correct and complete.

If the return is prepared by a Certified Public Accountant (CPA)or by a CPA firm duly registered as a specialist, it must includethe registration number and be electronically signed by theauthorized person.

PART 1 - ADJUSTED GROSS INCOME

CHILD INCOME (Section 1032.05)

All income received by a child for a service rendered must beincluded as part of his/her gross income and not in the grossincome of the parents. The child will have the obligation to file areturn if his/her gross income is more than zero and will havethe right to claim all the deductions provided by law that areapplicable. On the other hand, passive income such as interests,dividends, donations, prizes and contests, among others, willnot be included as part of the gross income of the child. Therefore,that income will be included on the parent’s return.

If the child receives income from services rendered, and saidgross income is less than $2,500, the parents can claim him/heras a dependent. In case that the child is a regular student, saidgross income should not exceed $7,500.Line 1 - Wages, Commissions, Allowances and TipsTotal withholding statements with this return: Enter in thefirst block the amount of Withholding Statements (Form 499R-2/W-2PR ) received by you or your spouse during the taxableyear (Do NOT include withholding statements with salaries paidunder Act 14-2017).

In Column A, enter the sum of income tax withheld from wages,shown in Box 13 of each Withholding Statement included in thisreturn. If there is no tax withheld, enter zero.

In Column B, enter all the wages, commissions, allowances and tipssubject to withholding in Puerto Rico. This information comes fromBox 11 of each Withholding Statement submitted with this return.

Total withholding statements with this return under aqualified physician decree: If you receive salaries as aqualified physician who have a decree in force under theIncentives for the Retention and Return of Medical ProfessionalsAct (Act 14-2017, as amended), make sure that your employerhas check in Form 499R-2/W-2PR that the remuneration includespayments for this concept.

Enter in the first block the amount of withholding statements receivedunder a qualified physician decree included with the return,follow by the income tax withheld in Column A and salaries paidin Column B.

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Total: The sum of the amount reflected on each column.

Make sure to include with your return the informationrequired of all the Withholding Statements (Form 499R-2/W-2PR).

Line 1C - Wages reported in a Federal W-2 Form

Enter the total of Federal Government income from salaries andwages received, excluding the Cost of Living Allowance (COLA).To determine if you qualify for this exclusion, refer to RELEVANTFACTS - FEDERAL EMPLOYEES. Also, you can refer to the"Informative Booklet to Provide Guidance on the Income TaxResponsibilities of Federal, Military and Other Employees".

Remember to enter the Cost of Living Allowance (COLA)received on line 11, Part II of Schedule IE Individual.

Total W-2 Forms with this return: Enter in the first block theamount of Federal Withholding Statements (W-2 Forms)received by you and your spouse during the taxable year (DoNOT include W-2 Forms with salaries paid under a qualifiedphysician decree, Act 14-2017, as amended).

Enter in the second block identified as Exempt Wages underSection 1031.02(a)(36) of the Code the amount received fromFederal Government salaries, up to a maximum of $40,000, ifyou are a young individual whose age fluctuates between 16and 26 years at the end of the taxable year. Transfer thisamount to line 31A, Part II of Schedule IE Individual.

In Column A, enter the total income tax withheld for Puerto Ricoreported on each W-2 Form included with this return. If there isno tax withheld, enter zero.

In Column B, enter all wages from the Federal Governmenttaxable in Puerto Rico.

Total W-2 Forms with this return under a qualifiedphysician decree: If you receive salaries as a qualifiedphysician who have a decree in force under the Incentives forthe Retention and Return of Medical Professionals Act (Act 14-2017, as amended), enter in the first block the amount of W-2Forms received and in the second block the Exempt Wagesunder Section 1031.02(a)(36) of the Code, follow by the incometax withheld for Puerto Rico in Column A and salaries paid inColumn B.

Make sure to include with your return the requiredinformation of all the W-2 Forms. You must keep foryour records copy of the form in case it is requested bythe Department.

Do not include as part of this line the wages reported in aFederal W-2 that has been reported by an employer of privatecompany. These amounts are reported in Part V, line 1, ColumnE of Schedule F Individual - Other Income.

Line 2 - Other Income (or Losses)

Enter on lines 2A through 2T the total of each type of otherincome or deductible losses, and provide detailed informationfor each one of them on the applicable Schedules.

If you received a total distribution from a qualified pension plandue to separation from service, use Schedule D Individual toinform it and transfer to Part 1, line 2A of the return. If you generateda net gain or loss on the sale or exchange of capital assets or alump-sum distribution of a variable or fixed annuity contract, useSchedule D Individual to determine it and transfer to Part 1, line2B of the return. (See instructions of Schedule D Individual).

Use Schedule F Individual to inform income from distributionsand transfers from government plans; distributions of Individual

Retirement Accounts, Educational Contribution and My FutureAccounts; under Other income: income from discharge of debts,income from the use of intangibles, income from judicial orextrajudicial indemnification, income from sports teams ofinternational associations or federations and the distributableshare on net income subject to preferential rates from pass-through entities; distributions from deferred compensation plans(non qualified); distributions from qualified retirement plans (partialor lump-sum not due to separation from service or plantermination); and Distributions due to a disaster declared by theGovernor of Puerto Rico. Transfer the amounts from ScheduleF Individual to Part 1, lines 2E to 2G, 2L and 2O of page 2 ofyour return. (See instructions of Schedule F Individual).

Use Schedule FF Individual to inform income from interests,corporate dividends, income from prizes and contests andmiscellaneous income. Transfer the amounts from Schedule FFIndividual to Part 1, lines 2C, 2D and 2G of page 2 of yourreturn. (See instructions of Schedule FF Individual). In the linefor total (Total $ _______) included on lines 2C, 2D and 2Ginclude the gross income received for each of the conceptsincluded on these lines. The amount to be included in the spaceprovided for total shall be as follows:

• Line 2C - Transfer to the line of total the result of the sum ofline 1(c), Columns A through G, Part I of Schedule FFIndividual;

• Line 2D - Transfer to the line of total the result of the sum ofline 1, Columns A through D, Part II of Schedule FF Individual;

• Line 2G - Transfer to the line of total the result of the sum ofline 1, Columns A and B, Part III of Schedule FF Individualand the result of the sum of Columns A through F on line 1,Part V of Schedule F Individual.

If you received dividends from an investment in a CapitalInvestment Fund or Tourism Fund, use Schedule Q1 to determinethis income. This Schedule with its instructions is available in ourwebpage: www.hacienda.pr.gov.

If you received income from trade or business or an activity forthe production of income, use the applicable Schedule: (1)Schedule J Individual - to inform manufacturing income; (2)Schedule K Individual - to inform the income from the sale ofgoods; (3) Schedule L Individual - to report the farming income;(4) Schedule M Individual - to inform income from servicesrendered; (5) Schedule N Individual - to inform rental income.For each one of the total lines (Total $ ______) that are includedon lines 2P through 2T, the amount of gross income reported online 3, Part II of Schedules J, K or L Individual, on lines 1 and 6,Part II of Schedule M Individual or on line 1, Part II of ScheduleN Individual, as it corresponds, should be transferred.

In cases where you have received a Form 480.60 F in whichincome is reported on lines 1P through 1T of Part III, refer to theinstructions of said form to determine the amount that shall beincluded in the line for total (Total $ _____) included on lines 2Pto 2T indicated in the above paragraph.

If such activities are not your main source of income,transfer only the gain determined on the Schedules to Part 1,lines 2P through 2T of page 2 of your return. If you hadlosses, enter zero on lines 2P through 2T.

If you had a long-term capital gain in Capital Investment Funds,use Schedule Q1 to determine it and transfer to Part 1, line 2J ofyour return.

If you received a distributable share of benefits in partnerships,special partnerships and corporations of individuals, useSchedules R and R1 Individual, to determine this income. (Seeinstructions of Schedules R and R1 Individual). In the line fortotal (Total $ _______) that is included on line 2K, transfer theresult of the sum of lines 6 and 13 of Part I, Schedule R Individual.

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long as you comply with the following requirements:

1) Payment is made in the name and for the benefit of theformer spouse under a divorce or separation document.

2) Payment is not designated in such document as excludiblefrom the recipient’s gross income and not allowable as adeduction to the payer.

3) The payer and the former spouse are not members of thesame household on the date of payment.

4) There is no obligation to continue making any paymentsafter the death of the former spouse.

5) If the payment exceeds $20,000 during any calendar year,it shall be payable during each one of at least 6 yearsfollowing the divorce or separation.

You must provide the social security number of theperson who receives the payment and the judgmentnumber. You must keep for your records copy ofcanceled or substitute checks and the divorce decree.

Lump-sum payments for assets division, voluntarypayments not included in a court decree or agreementfor separation support, or child support payments, arenot deductible.

PART 2 – DEDUCTIONS, EXEMPTIONS AND NETTAXABLE INCOME

Line 6 – Total Deductions

Enter the total deductions corresponding to individual taxpayers,as determined on Schedule A Individual, Part I, line 11. In thecase of nonresidents or part-year residents, enter the totaldeductions applicable to individual taxpayers, as determinedon line 6, Part II of Schedule A Individual. Remember not tosubmit evidence of the deductions with the return.However, you must keep the evidence for thesedeductions for your records for at least 6 years, in casethey may be eventually requested by the Department.

For additional information, you can refer to the instructions ofSchedule A Individual.

Line 7 – Personal Exemption

Enter the amount of your personal exemption corresponding toyour filing status. If you are married living with spouse filingjointly, enter $7,000; if individual taxpayer, enter $3,500; ifmarried filing separately, enter $3,500.

Line 8 – Exemption for Dependents

Enter in the spaces provided on lines 8A and 8B, the number ofdependents claimed according to their category. Indicate online 8A the dependents with respect to whom the exemptionmay be claimed completely ($2,500 per dependent), and online 8B those whose exemption is only claimed in half under thespecial rule of parents with joint custody or married filing separatereturns ($1,250 per dependent).

Multiply the amount of dependents claimed in each category(line 8A by $2,500 and line 8B by $1,250) and enter the resultin the space provided for the total exemption for dependents.

The Code requires you to indicate on your return the socialsecurity number of any dependent claimed who is age one orolder at the end of the taxable year. When filing your return,you must include on Schedule A1 Individual, the name, dateof birth, relationship, and social security number of eachdependent claimed. If you do not complete such schedule, normeet these requirements, the exemption may be disallowed. If

In the case of nonresidents, include on line 2M the total incomefrom salaries, wages and compensations included on line 1 ofthe Informative Return - Payments to Nonresidents or forServices from Sources Outside of Puerto Rico (Form 480.6C).Also include the amount informed as public shows in box 12 ofForm 480.6C.

Enter on line 2N the alimony income received due to divorceor separation that does not constitutes child support forthe spouse that made the payment. You must provide thesocial security number of the person making the payment.

LOSSES

Every individual is entitled to claim as deduction the ordinaryand necessary expenses incurred during the year in theoperation of any industry or business. When these expensesexceed the income, a loss is produced in the operation of saidindustry or business.

The way in which said loss can be claimed will depend on theclassification of the activity. For these purposes, the activity shallbe classified as principal industry or business; or industry orbusiness that is not the principal industry or business.

Losses incurred in activities that are not the taxpayer’s or his/her spouse’s principal business or industry may be used tooffset only future income from the same activity that producedthe loss.

On the other hand, losses incurred in an industry or businessthat is the taxpayer's or spouse principal industry or businessmay be claimed against the net income of one or more activitiesthat are not the principal industry or business of the taxpayer orhis/her spouse, except wages and pensions.

However, if during the taxable year you dispose all the assetsused in an activity that is not your or your spouse’s principalbusiness or industry, you may use the excess of expenses(losses) not claimed in previous years, as a deduction againstany income derived in said disposition. Any excess will beconsidered as a capital loss subject to the 90% limitation of thenet capital gains for the current year or $1,000, whichever isless. If there is any loss, you can claim up to $ 1,000 as adeduction in each of the next five, seven or ten years, asapplicable. (See instructions for Schedule D Individual).

To classify an economic activity as a principal industry orbusiness, the following facts shall be considered:

• Time devoted to the activity.• If the taxpayer is dedicated to the activity in a regular,

continuous and substantial basis.• Taxpayer’s knowledge and experience with respect to

the activity’s operation.• If such activity essentially constitutes the taxpayer’s way of

living.

However, the determination as to what constitutes the taxpayer’sprincipal industry or business shall depend on the facts andcircumstances present in each case. The taxpayer must showthat a particular activity constitutes his/her principal industry orbusiness. The fact that he/she does so with respect to a particularyear, does not automatically qualify such activity as his/herprincipal industry or business for subsequent years. Thus, thetaxpayer must be able to show that such activity constitutes his/her principal industry or business with respect to each taxableyear.

Line 4 - Alimony Paid

Generally, you may claim as a deduction any periodic paymentmade for alimony under a divorce or separation decree, as

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the dependent does not have a social security number, youmust request one at your nearest Social Security Office.

For the definition of dependent, refer to the instructions forSchedule A1 Individual.

Line 9 – Additional Personal Exemption for Veterans

Enter the amount of $1,500 if you are veteran of the UnitedStates Armed Forces. If married filing jointly and both spousesare veterans, the additional personal exemption is $3,000.

Keep for your records copy of Form DD-214 (Dischargefrom U.S. Armed Forces).

Line 12 – Allowable deduction for Private Equity investment

In the case of individuals that, pursuant to Act 185-2014, asamended ("Act 185-2014"), or Act 60-2019, are consideredas accredited investors, they may claim a deduction for theirinitial investment in a private equity fund (PEF) or in a PuertoRico private equity fund (PEF-PR). For these purposes, anindividual will be considered as an accredited investor if at themoment of the initial investment in a PEF or PEF-PR:

• Is an individual resident of Puerto Rico or a United Statescitizen nonresident of Puerto Rico;

• Is a natural person who has individual net worth or networth jointly with his/her spouse in excess of $1,000,000without including the value of the principal residence; and

• Is a natural person with income over $200,000 in eachone of the two years preceding the date of the investment($300,000 in case of married person) and an expectationof the same level of income during the year in which theinvestment is made.

Also, in the case of natural persons who are partners of apartnership subject to provisions of chapter 7, Subtitle A of theCode, who qualify as Resident Investors, such partners may alsobe considered as Resident Investors for purposes of this deduction.

The amount allowable as deduction will be the following:

• If the initial investment was made in a PEF, the maximumdeduction amount will be 30% of the initial investmentprovided that such amount will not exceed 15% of the netincome before the deduction.

• If the initial investment was made in a PEF-PR, the maximumdeduction amount will be 60% of the initial investmentprovided that such amount will not exceed 30% of the netincome before the deduction.

The amount of the deduction not claimed in the first year maybe carried forward for a maximum period of 10 years if theinvestment was made in a PEF and 15 years if the investmentwas made in a PEF-PR.

For additional details, refer to Act 185-2014 and Act 60-2019.

In the case of individuals who qualify to claim this deduction,they must complete the following worksheet to determine themaximum amount allowable as deduction for initial investmentin a PEF or PEF-PR.

You must include with your return the following documents:

(1) An official certification issued by the PEF or PEF-PR,printed with the fund's letterhead and signed by a managingpartner or principal officer, with the following information:

• Name and employer identification number of the PEFor PEF-PR;

• If the fund is a PEF or PEF-PR;• Name and social security number of the resident investor

for which the certification is issued; and• The amount of the capital committed as initial investment

that was contributed during the taxable year by theresident investor for which the certification is issued,including any amount that has been contributed afterthe end of the taxable year but before the residentinvestor files the income tax return for such taxableyear. This amount will be included on line 1 of theworksheet to be completed.

(2) A schedule that includes the completed worksheet showinghow this deduction was determined.

(3) Evidence that the fund made the election under Act 185-2014 or Act 60-2019. Effective February 15, 2019, saidelection must be made through SURI according to theprovisions of Internal Revenue Circular Letter No. 19-03of February 5, 2019.

(4) In those cases where the taxpayer is claiming a deductionfrom previous years, a detail indicating the taxable year inwhich the deduction was generated, the amount ofdeduction generated by the investor, the amount of suchdeduction that was claimed in previous years, the amountof deduction available for the taxable year and the expirationdate of any available unclaimed balance to be used insubsequent years.

Determination of the Deduction:

1. Amount of capital committed as initialinvestment that qualifies as contributed duringthe taxable year (From the certificationissued by the PEF or PEF-PR) …............….

2. Applicable percentage:

• If the investment was in a PEF, enter 30%• If the investment was in a PEF-PR,

enter 60% ..................................................

3. Amount of deduction for initial investmentcontributed during the year (Multiply line 1 bythe applicable percentage on line 2) ...................

4. Amount of the deduction notclaimed in previous years…................…………

5. Total deduction for investmentin a PEF or PEF-PR (Add lines 3 and 4) ...........

Deduction Limitation:

6. Net income (Subtract line 10 of Part 2 fromline 5 of Part 1 of the return. If line 10 is morethan line 5, enter zero) …….......…............….

7. Applicable percentage:

• If the investment was in a PEF, enter 15%• If the investment was in an PEF-PR ,

enter 30% .................................................

8. Maximum amount allowable as deduction(Multiply line 6 by the applicable percentageon line 7) .......................................................

9. Allowable deduction on this return (Enter thesmaller between lines 5 and 8. Transfer thisamount to line 12 of Part 2 of the return) ........

$ _________

%

$ _________

$ _________

$ _________

$ _________

%

$ _________

$ _________

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PART 3 – COMPUTATION OF TAX, CREDITS AND TAXWITHHELD OR PAID

Those individuals who have chosen to pay taxes under theoptional tax (Schedule X Individual) shall not complete lines 14through 22 and will transfer the amount determined as optionaltax on line 6, Part II of Schedule X Individual to line 23 of this part.

Line 14 – Tax

Once the net taxable income is determined, you shall computethe tax and select the oval corresponding to the method used todetermine the same:

Oval 1 - Tax according to tables

Oval 2 - Tax at preferential rates

Oval 3 - Tax for nonresident aliens

Oval 4 - Tax determined using Form AS 2668.1, Back Pay ("Paga Atrasada")

If you are a resident of Puerto Rico, you must determine yourtax using the following table.

Enter the total tax determined on this line and select Oval 1.

TAX COMPUTATION TABLE

Normal tax for individuals corresponding to taxable yearsbeginning after December 31, 2012.

If your net taxable income(line 13, Part 2 of the return or line 11,Part II of Schedule CO Individual) is: Your tax will be:

Not over $9,000 0%

Over $9,000, 7% of the excessbut not over $25,000 over $9,000

Over $25,000, $1,120 plus 14%but not over $41,500 of the excess

over $25,000

Over $41,500, $3,430 plus 25%but not over $61,500 of the excess

over $41,500

In excess of $61,500 $8,430 plus 33%of the excessover $61,500

Preferential ratesIf you are a resident of Puerto Rico and derived income subject topreferential rates such as interests, dividends or long-term capitalgains, among others, you must complete Schedule A2 Individual. Onthis Schedule you shall determine the tax on income that is subject toa preferential rate and the regular tax on any other income, and youcan compare this amount with the regular tax on your total income sothat you can choose the most beneficial alternative.

Also, if your income subject to preferential rates is $20,000 ormore, it is required that you allocate the total allowable deductionsas computed on Schedule A Individual according to the differenttypes of income.

Complete Schedule A2 Individual and transfer the amount oftax from line 17 of this Schedule to Part 3, line 14 of the returnand select Oval 2. Submit Schedule A2 Individual withyour return.

Nonresident alien

If you are a nonresident alien not engaged in trade or businessin Puerto Rico, the income from sources within Puerto Rico willbe taxed at a fixed rate of 29% except in the case of dividends,that will be taxed at 15%, and the income attributable to thedistributable share of a stockholder in a corporation of individualswhich will be taxed at 33%. Enter the tax determined on line 14of the return and select Oval 3.

If you are a nonresident alien engaged in trade or business inPuerto Rico, all income from sources within Puerto Rico, aswell as those related to the operation of the trade or business inPuerto Rico, will be taxed at the normal tax rates.

Back Pay

You must select Oval 4 and use Form AS 2668.1 if you receiveda back pay during the current taxable year and the amount ofsuch back payment exceeds 15% of the gross income for thecurrent taxable year.

The Code defines back pay as remuneration, wages, salaries,pension or retirement payment received or accrued during thetaxable year, by an employee for services rendered for his/her employer and which would have been paid prior to thetaxable year except for the occurrence of any of the followingevents:

a) employer's bankruptcy or receivership;b) dispute as to the employer’s obligation to pay such

remuneration, determined after the beginning of a courtproceeding;

c) lack of funds assigned to pay such remuneration if theemployer is the Government of Puerto Rico, the UnitedStates, a state, a territory or any political subdivisionthereof, or the District of Columbia or any agency orinstrumentality of any of the foregoing; or

d) any other event of similar nature.

Back pay also includes retroactive wages or salary increases,received or accrued for services rendered by an employee tohis/her employer in a previous taxable year which have beenordered, recommended or approved by any federal agencyor from the Government of Puerto Rico, and made retroactiveto any period prior to the taxable year. In addition, paymentsmade as a result of an alleged violation by an employer of anyFederal Law or from the Government of Puerto Rico, related tolabor standards or practices, and which are determined to beattributable to a prior taxable year.

The taxpayer must include with the return Form AS 2668.1duly completed and the Employer Certification indicating thatthe payment consists of back pay, the amount of such pay, theyears to which it corresponds, the date of payment and theevent which originated the back pay.

Line 15 - Gradual Adjustment Amount

If the net taxable income is more than $500,000, you mustcomplete Schedule P Individual. Determine the gradualadjustment amount on said Schedule (See Instructions toComplete the Schedules). Enter the amount determined onSchedule P Individual, line 7. Submit this Schedule withthe return.

Line 17- Regular Tax before the Credit

Section 1021.01 (c) of the Code provides that the tax determinedwill be 95% of the sum of the regular tax and the gradual

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adjustment amount. However, for individuals with a gross incomethat does not exceed $100,000, the tax determined shall be 92%of the sum of the regular tax and the gradual adjustment amount.Therefore, the amount to be entered on this line will depend onthe method used to determine the tax on line 14 and on theamount of the taxpayer's gross income, as indicated below:

• If you selected Oval 1 (According to Table):

x If the sum of lines 1B, 1C, 2A, 2B, 2E, 2F, 2H, 2I, 2J,2L, 2M, 2N and 2O and the line of total (Total $________) included on lines 2C, 2D, 2G, 2K and 2Pthrough 2T, Part 1 of the return, plus the exempt incomefrom line 43 less lines 2D, 31B through 31F, and 37through 42, first Column, Part II of Schedule IE Individual,does not exceed $100,000 - Multiply line 16 by .92.

x If the result of the previous sum is greater than $100,000 -Multiply line 16 by .95

• If you selected Oval 2 (Preferential rates - Schedule A2Individual)- Enter the amount from line 16, Part 3 of thereturn. Do not multiply this amount by any of the percentages(92% or 95%) included on this line. (See instructions ofline 17, Schedule A2 Individual).

• If you selected Oval 3 (Non-resident aliens) or Oval 4 (ModelAS 2668.1) - Enter the amount on line 16.

Line 18 - Credit for taxes paid to foreign countries, theUnited States, its states, territories and possessions

Enter the amount of credit for taxes paid to foreign countries, theUnited States, its states, territories and possessions, asdetermined on Schedule C Individual. For specifications ofhow to determine this amount, refer to the instructions ofSchedule C Individual.

Line 20 - Excess of Net Alternate Basic Tax over NetRegular Tax

You must complete Schedule O Individual if your net incomesubject to alternate basic tax is more than $25,000.

To determine whether you are subject to the AlternateBasic Tax or not, complete and submit said Schedule(See Instructions to Complete the Schedules). Enter theamount determined on Schedule O Individual, Part II, line 7.

Line 21 – Credit for alternate basic tax

You must complete Parts III and IV of Schedule O Individual.

Enter the amount determined on line 4, Part III of Schedule OIndividual.

Line 27C - Employment credit

Generally, every individual resident of Puerto Rico throughoutthe year who generates earned gross income and is not claimedas a dependent of other taxpayer for the taxable year, shall beentitled to claim this credit against the income tax.

Taxpayers who do NOT have dependents

If the earned gross income does not exceed $18,000, theemployment credit will be equal to 5% of the earned grossincome, up to a maximum of $300.

In the case of an individual taxpayer, if the earned gross incomeexceeds $18,000 but is not over $20,500, the maximum creditof $300 shall be reduced by an amount equal to 12% of theearned gross income in excess of $18,000.

In the case of married taxpayers filing joint return, if the sum ofthe gross income earned of both spouses exceeds $18,000but is not over $21,750, the maximum credit of $300 shall bereduced by an amount equal to 8% of the earned gross incomein excess of $18,000.

Taxpayers who have ONE (1) dependent:

If the earned gross income does not exceed $13,000, theemployment credit will be equal to 7.5% of the earned grossincome, up to a maximum of $900.

In the case of an individual taxpayer, if the earned gross incomeexceeds $13,000 but is not over $20,500, the maximum creditof $900 shall be reduced by an amount of 12% of the grossincome earned in excess of $13,000.

In the case of married taxpayers filing a joint return, if the sum ofthe gross income earned by both spouses exceeds $13,000,but is not over $24,250, the maximum credit of $900 shall bereduced by an amount equal to 8% of the gross income earnedin excess of $13,000.

Taxpayers who have TWO (2) dependents:

If the earned gross income does not exceed $16,000, theemployment credit will be equal to 10% of the gross incomeearned, up to a maximum of $1,500.

In the case of an individual taxpayer, if the earned gross incomeexceeds $16,000 but is not over $28,500, the maximum creditof $1,500 shall be reduced by an amount equal to 12% of thegross income earned in excess of $16,000.

In the case of married taxpayers filing a joint return, if the sum ofthe gross income earned by both spouses exceeds $16,000,but is not over $34,750, the maximum credit of $1,500 shall bereduced by an amount equal to 8% of the gross income earnedin excess of $16,000.

Taxpayers who have THREE (3) or more dependents:

If the earned gross income does not exceed $17,000, theemployment credit will be equal to 12.5% of the gross incomeearned, up to a maximum of $2,000.

In the case of an individual taxpayer, if the gross income earnedexceeds $17,000 but is not over $33,500, the maximum creditof $2,000 shall be reduced by an amount equal to 12% of thegross income earned in excess of $17,000.

In the case of married taxpayers filing a joint return, if the sum ofthe gross income earned by both spouses exceeds $17,000,but is not over $42,000, the maximum credit of $2,000 shall bereduced by an amount equal to 8% of the gross income earnedin excess of $17,000.

For purposes of this credit, the term earned gross incomeincludes salaries, wages, tips, pensions, any remuneration forservices rendered by an employee to his/her employer orother compensation derived from the rendering of services asan employee, but only if such amounts are included in thegross income for the taxable year, as long as duly informed in awithholding statement required under Section 1062.01(n)(2) oran informative return issued under Section 1081.01 of the Code. The gross income earned shall be determined separately foreach individual, without taking into account any amount receivedas taxable income under Section 1091.01 of the Code(nonresident aliens), or the amount received by an individualfor services rendered while such individual is confined in apenal institution.

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However, in the case of married taxpayers filing joint return,regardless of whether or not they choose for the optional tax,the credit will be determined based on the sum of the earnedincome from both spouses. In addition, those marriedtaxpayers who choose to file their return separately willnot be eligible to claim this credit.

No credit shall be allowed if the taxpayer derives net incomefrom interest or dividends, rents or royalties, the sale of capitalassets, alimony payments received from divorce or separation,or any other type of income not considered earned income, aspreviously defined, in excess of $2,200 for the taxable year.

The credit shall be claimed against the tax determined after theother credits that the taxpayer is entitled to claim are reduced.The amount of credit in excess of the tax determined will berefunded to the taxpayer or can be credited against the estimatedtax for the subsequent taxable year.

Every taxpayer who unduly claims this credit shall be liable forthe payment of a sum equal to the credit unduly claimed asadditional income tax, including interest, surcharges andpenalties, as established in the Code, for the year in which theamount of that sum unduly claimed is determined. In the case offraud, in addition to being liable for the payment herein provided,the taxpayer may not benefit from this credit for a period of 10years starting from the year in which the Secretary determinesthe total of any amount unduly claimed.

To be eligible, every taxpayer must also comply with thefollowing:

• the taxpayer, spouse (in the case of married taxpayers),and the eligible dependents for the credit must be residents

$___________

$___________

$___________

$___________

Table IWorksheet to Determine the Employment Credit for an Individual Taxpayer or

Married Person Filing Jointly who do Not have Dependents

Married PersonFiling Jointly

$___________

$___________

$___________

$___________

IndividualTaxpayer

1. Enter the total of lines 1B and 1C from Part 1 of the return, line 7 Part II of each Schedule H Individual,and lines 6, 7, 8, 9, 11, 12 and 16, first Column, Part II of Schedule IE Individual (or the total of lines 1and 2, Part I of Schedule CO Individual, Columns B and C, line 7, Part II of each Schedule H Individual,and lines 6, 7, 8, 9, 11, 12 and 16, first Column of Part II of each Schedule IE Individual, if you choosethe optional computation of tax). If the total is more than $20,500 ($21,750 if married filing jointly), do notcontinue and enter zero ("0") on line 27(C), Part 3 of the return ..........................................................

2. Enter the amount of other income not considered earned gross income (lines 2A through 2G, 2I through 2Land 2N through 2T Part 1 of the return, plus line 43 less lines 6, 7, 8, 9, 10, 11, 12, 15 and 16, first Column ofPart II of Schedule IE Individual) (or lines 3A through 3G, 3I through 3L and 3N through 3T, Part I of ScheduleCO Individual, Columns B and C, plus line 43 less lines 6, 7, 8, 9, 10, 11, 12, 15 and 16, first Column of PartII of each Schedule IE Individual, if you choose the optional computation of tax): $____________. If thisamount is more than $2,200, do not continue and enter zero ("0") on line 27(C) of Part 3 of the return.

3. If line 1 is $18,000 or less, multiply it by 5%. Otherwise, go to line 5 ....................................................

4. Enter the smallest amount between line 3 and $300. Transfer to line 27(C), Part 3 of the return ...........

5. If line 1 is more than $18,000 but not over $20,500 ($21,750 if married filing jointly), enter here and online 27(C), Part 3 of the return the product of the following calculation:

$300 - [(line 1 of this worksheet - $18,000) x 12% (or 8% for married filing jointly)]$300 - [($__________ - $18,000) x 12% (or 8%)]$300 - [$__________ x 12% (or 8%)]$300 - $__________ = ..............................................................………....................................…..

* For purposes of this calculation, do not consider cents.* If the result of this calculation is zero ("0") or negative, enter zero on line 27(C) Part 3 of the return.

of Puerto Rico throughout the taxable year for which thecredit is claimed and at the time of filing the income tax return;

• this credit will only be allowed if the taxpayer has not died atthe time of filing the income tax return in which this credit isclaimed;

• the taxpayer and spouse (in the case of marriedtaxpayers), must be 27 years of age or older on the lastday of the taxable year;

• only the taxpayer's (or spouse's) children who, on the lastday of the taxable year, are 18 years of age or younger,will be considered dependents, provided that in the case ofchildren who are full-time students, they will be consideredas dependent for these purposes if on the last day of thetaxable year they do not exceed 25 years of age;

• married taxpayers filing separately are not eligible for thiscredit; and

• you cannot claim the Credit for Persons Age 65 or Older orLow Income credit granted under Section 1052.02 of theCode.

Select one of the worksheets provided below, to determine theamount of credit that you may claim. Use Table I if you are anindividual taxpayer or married filing a joint return with nodependents. Use Table II if you are individual taxpayer ormarried person filing a joint return with one (1) dependent. UseTable III if you are individual taxpayer or married person filinga joint return with two (2) dependents. Use Table IV if you areindividual taxpayer or married person filing a joint return withthree (3) or more dependents.

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$___________

$___________

$___________

$___________

Table IIWorksheet to Determine the Employment Credit for an Individual Taxpayer or

Married Person Filing Jointly who have One (1) Dependent

Married PersonFiling Jointly

$___________

$___________

$___________

$___________

IndividualTaxpayer

1. Enter the total of lines 1B and 1C from Part 1 of the return, line 7, Part II of each Schedule H Individual,and lines 6, 7, 8, 9, 11, 12 and 16, first Column, Part II of Schedule IE Individual (or the total of lines 1and 2, Part I of Schedule CO Individual, Columns B and C, line 7, Part II of Schedule H Individual, andlines 6, 7, 8, 9, 11, 12 and 16, first Column of Part II of each Schedule IE Individual, if you choose theoptional computation of tax). If the total is more than $20,500 ($24,250 if married filing jointly), do notcontinue and enter zero ("0") on line 27(C), Part 3 of the return ..................................................................

2. Enter the amount of other income not considered earned gross income (lines 2A through 2G, 2I through 2Land 2N through 2T Part 1 of the return plus line 43 less lines 6, 7, 8, 9, 10, 11, 12, 15 and 16, first Columnof Part II of Schedule IE Individual) (or lines 3A through 3G, 3I through 3L and 3N through 3T, Part I ofSchedule CO Individual, Columns B and C, plus line 43 less lines 6, 7, 8, 9, 10, 11, 12, 15 and 16, firstcolumn of Part II of each Schedule IE Individual, if you choose the optional computation of tax): $____________.If this amount is more than $2,200, do not continue and enter zero ("0") on line 27(C) of Part 3 of the return.

3. If line 1 is $13,000 or less, multiply it by 7.5%. Otherwise, go to line 5 ....................................................

4. Enter the smallest amount between line 3 and $900. Transfer to line 27(C), Part 3 of the return .............

5. If line 1 is more than $13,000 but not over $20,500 ($24,250 if married filing jointly), enter here and online 27(C), Part 3 of the return the product of the following calculation:

$900 - [(line 1 of this worksheet - $13,000) x 12% (or 8% for married filing jointly)]$900 - [($__________ - $13,000) x 12% (or 8%)]$900 - [$__________ x 12% (or 8%)]$900 - $__________ = .....................................................................................................................

* For purposes of this calculation, do not consider cents.* If the result of this calculation is zero ("0") or negative, enter zero on line 27(C) Part 3 of the return.

$___________

$___________

$___________

$___________

Table IIIWorksheet to Determine the Employment Credit for an Individual Taxpayer or

Married Person Filing Jointly who have Two (2) Dependent

Married PersonFiling Jointly

$___________

$___________

$___________

$___________

IndividualTaxpayer

1. Enter the total of lines 1B and 1C from Part 1 of the return, line 7 Part II of each Schedule H Individual,and lines 6, 7, 8, 9, 11, 12 and 16, first Column Part II of Schedule IE Individual (or the total of lines 1 and2, Part I of Schedule CO Individual, Columns B and C, line 7 Part II of each Schedule H Individual, andlines 6, 7, 8, 9, 11, 12 and 16, first Column of Part II of each Schedule IE Individual, if you choose theoptional computation of tax). If the total is more than $28,500 ($34,750 if married filing jointly), do notcontinue and enter zero ("0") on line 27(C), Part 3 of the return...................................................................

2. Enter the amount of other income not considered earned gross income (lines 2A through 2G, 2I through 2Land 2N through 2T of Part 1 of the return plus line 43 less lines 6, 7, 8, 9, 10, 11, 12, 15 and 16, first Columnof Part II of Schedule IE Individual) (or lines 3A through 3G, 3I through 3L and 3N through 3T, Part I ofSchedule CO Individual, Columns B and C, plus line 43 less lines 6, 7, 8, 9, 10, 11, 12, 15 and 16, firstcolumn of Part II of each Schedule IE Individual, if you choose the optional computation of tax): $____________.If this amount is more than $2,200, do not continue and enter zero ("0") on line 27(C) of Part 3 of the return.

3. If line 1 is $16,000 or less, multiply it by 10%. Otherwise, go to line 5 ...........................................................

4. Enter the smallest amount between line 3 and $1,500. Transfer to line 27(C), Part 3 of the return ............

5. If line 1 is more than $16,000 but not over $28,500 ($34,750 if married filing jointly), enter here and online 27(C), Part 3 of the return the product of the following calculation:

$1,500 - [(line 1 of this worksheet - $16,000) x 12% (or 8% for married filing jointly)]$1,500 - [($__________ - $16,000) x 12% (or 8%)]$1,500 - [$__________ x 12% (or 8%)]$1,500 - $__________ = ...................................................................................................................

* For purposes of this calculation, do not consider cents.* If the result of this calculation is zero ("0") or negative, enter zero on line 27(C) Part 3 of the return.

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$___________

$___________

$___________

$___________

Table IVWorksheet to Determine the Employment Credit for an Individual Taxpayer or

Married Person Filing Jointly who have Three (3) or more Dependents

Married PersonFiling Jointly

$___________

$___________

$___________

$___________

IndividualTaxpayer

1. Enter the total of lines 1B and 1C from Part 1 of the return, line 7 Part II of each Schedule H Individual,and lines 6, 7, 8, 9, 11, 12 and 16, first Column Part II of Schedule IE Individual (or the total of lines 1 and2, Part I of Schedule CO Individual, Columns B and C, line 7 Part II of each Schedule H Individual, andlines 6, 7, 8, 9, 11, 12 and 16, first Column of Part II of each Schedule IE Individual, if you choose theoptional computation of tax). If the total is more than $33,500 ($42,000 if married filing jointly), do notcontinue and enter zero ("0") on line 27(C), Part 3 of the return ...................................................................

2. Enter the amount of other income not considered earned gross income (lines 2A through 2G, 2I through 2Land 2N through 2T of Part 1 of the return plus line 43 less lines 6, 7, 8, 9, 10, 11, 12, 15 and 16, first Columnof Part II of Schedule IE Individual) (or lines 3A through 3G, 3I through 3L and 3N through 3T, Part I ofSchedule CO Individual, Columns B and C, plus line 43 less lines 6, 7, 8, 9, 10, 11, 12, 15 and 16, firstcolumn of Part II of each Schedule IE Individual, if you choose the optional computation of tax): $____________.If this amount is more than $2,200, do not continue and enter zero ("0") on line 27(C) of Part 3 of the return.

3. If line 1 is $17,000 or less, multiply it by 12.5%. Otherwise, go to line 5 ................................................

4. Enter the smallest amount between line 3 and $2,000. Transfer to line 27(C), Part 3 of the return .........

5. If line 1 is more than $17,000 but not over $33,500 ($42,000 if married filing jointly), enter here and online 27(C), Part 3 of the return the product of the following calculation:

$2,000 - [(line 1 of this worksheet - $17,000) x 12% (or 8% for married filing jointly)]$2,000 - [($__________ - $17,000) x 12% (or 8%)]$2,000 - [$__________ x 12% (or 8%)]$2,000 - $__________ = ..................................................................................................................

* For purposes of this calculation, do not consider cents.* If the result of this calculation is zero ("0") or negative, enter zero on line 27(C) Part 3 of the return.

Line 27D - Reimbursable credits from the FederalGovernment

Transfer to this line the total of the American opportunity taxcredit determined in Schedules B2, B2.1 and B2.2 Individual,as applicable. The balance of the economic impact paymentowed to the taxpayer, as determined in Schedule B3 Individual,shall be transferred here. To see the requirements and limitationsapplicable to each of these credits, you must refer to theSchedules and their respective instructions available throughour webpage www.hacienda.pr.gov.

Those credits attributable to Schedule B4 Individual, will notform part of the 2020 return. The Department will issue soon apublication with more details about these credits.

Line 27E - Amount paid with automatic extension of time

Enter on this line the amount of tax paid with automatic extensionof time. This is the amount reflected on line 1a, Part II of FormAS 2644 filed on time at the Department.

If for any reason you understand that you will not be able to fileyour return on time, you may request an automatic extension oftime on or before the due date to file the return. The request willbe done by filing Form AS 2644. If you file this form on time, theextension will be automatically granted for a period of 6 month.Filing an extension of time does not extend the time for paymentof any tax due with the return.

In case of military personnel active at any combat zone,refer to RELEVANT FACTS.

A taxpayer that has the obligation to pay estimated tax,must pay the total tax with the request of extension oftime. If you do not have the obligation to pay estimated tax andqualify to pay the tax due with the return in two installments, asdescribed in the instructions of line 3 on page 1 of the return,you must submit your extension of time request with at least50% of the balance of tax due. See instructions on the obligationto pay estimated tax on page 80 of this instructions booklet.

Line 28 - Amount of Tax Due

Compare the amount on lines 26 and 27F. If line 26 is morethan line 27F, there is a balance of tax due. Enter the differenceon this line. If the amount on line 27F is more than the amounton line 26, you have a tax overpayment. Enter this differenceon line 29.

Line 30 - Addition to the Tax for Failure to Pay Estimated Tax

Enter the addition to the tax for failure to pay estimated taxpreviously determined on Schedule T Individual. (Seeinstructions to complete Schedule T Individual).SCHEDULE

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SCHEDULE A INDIVIDUAL – DEDUCTIONS APPLICABLETO INDIVIDUAL TAXPAYERS

Use this Schedule to determine the total deductions applicableto taxpayers that are individuals. Remember not to submitevidence of the deductions with the return. However,you must keep the evidence of these deductions foryour records for at least 6 years, in case that they may beeventually requested by the Department.

In the case of taxpayers who choose the optional computationof tax, some of these deductions will be attributed 50% to eachspouse and others will be allowed to the spouse to whom theycorrespond individually.

The deductions that will be attributed 50% to each spousewhen they choose the optional computation of tax are thefollowing: mortgage interest, casualty loss on your principalresidence, medical expenses, charitable contributions, and lossof personal property because of certain casualties. Once thetotal of these deductions is determined in Part I, line 6 of thisschedule, you must transfer 50% to Columns B and C on line1, Part II of Schedule CO Individual.

Deductions individually allocated under the optional computationof tax are the following: contributions to individual retirementaccounts, educational contribution and my future accounts andinterest paid on students' loans at university level, up to thelimits and subject to the provisions of the Code. Therefore,when determining the sum of these deductions on line 10,Columns A and B, Part I of this Schedule, you must transfer thetotal of the amounts determined, as it corresponds to the taxpayerand his/her spouse, to line 2, Columns B and C of ScheduleCO Individual.

PART I – DEDUCTIONS APPLICABLE TO INDIVIDUALTAXPAYERS

Line 1 - Enter the amount of home mortgage interest paid oraccrued to acquire, refinance, improve or build a property thatconstitutes a qualified residence. There shall be allowed as adeduction the total amount of interest paid up to a maximum of$35,000, as long as this amount does not exceed the greater of:

(i) 30% of the adjusted gross income (Part 1, line 5 of thereturn) plus any other income excluded or exempt fromthe adjusted gross income, including child support payments(Schedule IE Individual, Part III, line 1) received duringthe taxable year for which the deduction is claimed; or

(ii) 30% of the taxpayer’s adjusted gross income plus anyother income excluded or exempt from the adjusted grossincome, including child support payments, for any of thepreceding three (3) taxable years before the year for whichthe deduction is claimed.

These limitations will not apply when the taxpayer or his/herspouse is age 65 or older at the end of the taxable year. If youqualify for this exception, make sure to indicate the date of birthfor you and your spouse (if applicable) on page 1 of the return.

If you qualify for exception (ii), please complete question D ofthe Questionnaire, page 1 of the return and select the ovalprovided on line 1(j), Part I of this Schedule.

You must keep for your records the Informative Return- Mortgage Interest (Form 480.7A) provided by thefinancial institution.

Enter in the spaces provided on lines 1(a) through 1(d),the name and employer identification number of thebanking or financial institution to which the paymentswere made, the loan number, the control number andthe electronic filing confirmation number of the Form480.7A, the and the total amount of home mortgageinterest paid, as reported on Form 480.7A.

In the case of nonresidents of Puerto Rico taxpayers who arecitizens of the United States, there shall be allowed as a deductionthe total home mortgage interest paid or accrued to acquire,refinance, improve or build a property that constitutes the principalresidence of the taxpayer. This first residence may be locatedoutside of Puerto Rico and in most cases the interest paid will bereported on Form 1098 - Mortgage Interest Statement.

Deduction shall not be allowed for interest on home mortgagesin other residences, which are not the principal residence of thetaxpayer, if such interests are not informed on Form 480.7A.

To claim this deduction, the taxpayer must include with thereturn the required information of Form 1098 - Mortgage InterestStatement. Also, on line 1 (e) you must select oval 2 thatcorresponds to Form 1098 and other.

Qualified residence means:

1) the principal residence of the taxpayer;

2) a second residence located in Puerto Rico and used bythe taxpayer, or by any other person that has an interestin that property or by any member of his/her family, as aresidence for a number of days that exceeds the greaterof:a) 14 days, or

b) 10% of the number of days during the taxable year inwhich the property has been rented at the prevailingrental market value.

Interest payments attributable to any portion of the mortgagedebt in excess of the residence fair market value are notdeductible.

A participant partner of a housing cooperative association maydeduct payments representing home mortgage interest.

If you use a personal loan to acquire, build or improve aqualified residence, which is not accepted by a mortgageinstitution as a mortgage guarantee, you must keep for yourrecords a copy of the property tax exemption application or ofthe appraised revision of the property.

Also, loan origination fees (Points) paid directly by theborrower and loan discounts (Points) paid directly bythe borrower, will be admitted as home mortgage interestdeduction for the year in which they were incurred, aslong as the following requirements are met:

1) they are reported on the Informative Return – MortgageInterest (Form 480.7A or equivalent form (i.e. Form 1098)),

2) they are paid to acquire the principal residence,

3) they are paid by the taxpayer; if they are financedthrough the mortgage loan, they will be deductiblethroughout the term of the loan, and

INSTRUCTIONS TO COMPLETE THE SCHEDULES

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In the case of married persons filing separate returns, or thatchoose the optional computation of tax, each spouse may claim50% of this deduction.

An individual resident of Puerto Rico for taxable year 2020who remain as resident at the moment of filing the 2020 Return,can claim a deduction for casualty losses to the extent that thestructure of the principal residence suffered some damage as aresult of the seismic activity, storms, hurricane, or other casualtiesoccurred during the taxable year. For more details of additionalrequirements to claim this deduction and the required evidence,refer to the publications issued by the Department for thesepurposes.

Line 3 - Enter the total medical expenses paid not compensatedby insurance or in any other form, which exceeds 6% of youradjusted gross income. Transfer to this line the amount of PartIII, line 3 of this Schedule.

Medical expenses are:

1) professional services rendered by physicians, dentists,radiologists, clinical pathologists, surgeons, nurses orhospitals, within or outside Puerto Rico;

2) health or accident insurance premiums;

3) medicines for human consumption, destined to be used inthe diagnosis, cure, mitigation, treatment or prevention ofillnesses, that were acquired solely and exclusively bymedical prescription, if they have been prescribed by aphysician authorized to practice the medical professionin Puerto Rico and were dispatched by a pharmacistlicensed in Puerto Rico; and

4) expenses incurred in the acquisition of any technologicalassistance equipment for persons with disabilities,specialized treatments or chronic illnesses.

For purposes of this deduction, the term technologicalassistance equipment means: any object, equipment orsystem part, purchased by the consumer, or provided by anyagency or governmental dependency, that is original, modifiedor adapted, and that is used to maintain, increase or improvethe capability of persons with disabilities. This includes but is notlimited to: wheelchairs, motorized wheelchairs, motorizedequipment used for mobility, adapted computers, electroniccommunication equipment, adapted computer programs,mechanic equipment used to read, hearing aids, among others.

The parent, tutor or person responsible for the individual withthe disability, specialized treatment or chronic illness, may claimthis deduction or the individual in his/her own capacity.

You must keep for your records the invoice or receipt thatindicates the cost of the equipment and a medicalcertificate that indicates that the equipment is necessaryfor the condition or illness of the patient, in addition to thecopy of cancelled or substitute checks, or receiptsevidencing the payments made for medical assistance.

In the case of persons who qualify to deduct the cost incurred ina medical insurance for himself/herself or his/her family as partof the industry or business expenses, he/she cannot claimsimultaneously such expense as part of the deduction for medicalexpenses.

Line 4 - You may claim a deduction for the contributions ordonations to nonprofit organizations made during the taxableyear, subject to certain limitations, only if the entities areauthorized under the rules and regulations promulgated by the

4) you keep for your records a copy of the canceled orsubstitute check.

The loan origination fees and loan discounts financed througha home mortgage loan will be deductible throughout the term ofthe loan. The deduction that you may claim will be theapportioned amount paid during the term of the loan.

In case of married taxpayers filing separately who only ownone residence, one of the spouses has the sole right to claimsuch deduction. If the married couple has two residences, onespouse may claim the interest of the principal residence and theother spouse may claim the interest of the second residence.However, one of the spouses may claim all the home mortgageinterest for both residences, if both spouses agree to that inwriting.

The taxpayer must keep for his/her records the written evidenceof the cession of such deduction by the spouse.

It is important to point out that for taxable years beginning afterDecember 31, 2016, the taxpayer may claim this deduction,even if he/she is not the borrower or joint borrower of the loanfully guaranteed with mortgage, when he/she can demonstratethat:

(i) is the legal owner of the property that guarantees the debtor the person who will suffer the real effect of an executionof the same;

(ii) made all of the debt payments during the taxable yeardirectly to the person required to file the informative returndescribed in Section 1063.04 of the Code (Form 480.7A);and

(iii) the borrower or joint borrower of the loan fully guaranteedwith the mortgage did not claim this deduction.

In the case of taxpayers who comply with the aforementionedrequirements, they may claim the deduction of the mortgageinterest paid on the line of Home mortgage interest of theprincipal residence not reported on Form 480.7A. Also, on line1 (e) you must select oval 1 that corresponds to Section1033.15(a)(1)(F) of the Code and complete the requiredinformation.

In order to take the deduction, the taxpayer must have to submitalong with the return a sworn statement that complies with therequirements set forth in Section 1033.15 (a) (1) (G) of Code.This sworn statement shall be filed through SURI.

For more details on how to claim this deduction, referto Section 1033.15(a)(1)(F) of the Code.

Line 2 - Enter losses on real property used as yourprincipal residence incurred during the taxable year, notcompensated by insurance or in any other form. Such lossesmust be caused by hurricane, earthquake, storm, tropicaldepression, floods, fire or other casualties.

You must keep for your records a certification stating the amountof the loss and the type of damage. Also, you must keep foryour records a certification from the Civil Defense orFire Department if the loss was from fire, and any otherdocuments, public deeds or appraisals which reflectthe value of the property subject to the loss.

If after claiming the deduction, you receive any compensationfrom an insurance company or from a state or federal agency,you must include on the return the total amount received as partof your gross income.

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Proyecto Matria, Centro de Adiestramiento y ServiciosComunitarios E.P.I., Inc., Producir, and ComerciantesUnidos para el Desarrollo Comunitario de Camuy.

G. International Activities – Example: Comité Olimpico dePuerto Rico, Inc.

H. Health Services – Examples: MDA – Asociación DistrofiaMuscular, SER de Puerto Rico, Centro Margarita, Centrode Ayuda y Terapia al Niño con Impedimento (AYANI),Iniciativa Comunitaria de Investigación, and The Leukemiaand Lymphoma Society.

I. Religious Services – Example: All churches.

J. Environmental Services – Example: Sierra Club andPara la Naturaleza.

K. Organizations for the Exclusive Benefit of itsMembers

L. Other Services – Examples: Alianza para un Puerto Ricosin Drogas (drug prevention services in high risk schoolsand communities), Puerto Rico Industries for the Blind(employ and train visually impaired persons), andemployees’ voluntary and beneficent associations.

The allowable deduction for charitable contributions isthe total amount of the donations paid, not to exceed50% of your adjusted gross income.

Charitable Contributions to Conservation Easements andMuseological Institutions

The allowable deduction for contributions to conservationeasements and museological institutions must be included inColumn C. Also, you must include in the space provided thename and employer identification number of the entity to whichthe contribution was made. The allowable deduction forcontributions of conservation easements to agencies of theGovernment of Puerto Rico or non profit organizations (only ifyou do not claim a tax credit for this concept) may notexceed 30% of your adjusted gross income and is subject tothe requirements provided by the Puerto Rico ConservationEasement Act, as well as for contributions to museologicalinstitutions, private or public, that consist of art work properlyappraised or of any other objects of recognized museologicalvalue.

If the fair market value of the contributed property exceeds theadjusted basis in the hands of the donor (determined underSection 1034.02 of the Code) by more than 25%, you will beallowed a deduction for the fair market value of the propertydonated, up to 30% of your adjusted gross income for thetaxable year.

It is important to point out that in order to claim the deduction forcharitable contributions made to private museological institutions,they have to be conditioned in terms that any type of futurenegotiation with the work or contributed object is forbidden, andthat in case of dissolution of the private museological institution,the title of the art work or museological value objects contributedwill be transferred to the Government of Puerto Rico and willbecome part of the National Collection of the Institute of PuertoRican Culture. If the charitable contributions is made to a museumlocated in Puerto Rico that is dully accredited by the AmericanAssociation of Museums, the deduction will be the fair marketvalue up to 50% of the adjusted gross income of the taxpayerand will not be subject to the previous limitations.

Secretary. No part of the net earnings of any organizationor entity to which you contribute may benefit any privateshareholder or individual.

Among the nonprofit organizations and other entities approvedby the Code and regulations as entities for which a deductionfor contributions can be claimed, are the following:

• the Government of Puerto Rico, the United States,any of its states, territories, or any political subdivisionthereof, or the District of Columbia, or any possession ofthe United States, exclusively for public purposes;

• churches and religious organizations;

• university level accredited educational institutionsestablished in Puerto Rico; or

• nonprofit organizations created or organized in PuertoRico, the United States or any of its possessions, qualifiedby the Secretary of the Treasury, such as thoseproviding community service, charitable, scientific, literary,art, educational or museological, organizations engagedin the prevention of cruelty or child abuse, elderly ordisabled people, prevention of cruelty and abuse ofanimals, the prevention of domestic violence or hate crimes,or to organizations of economic, social, and communitydevelopment. It shall be an indispensable requirement toallow the deduction that the entity to which the contributionor donation is made, provide services to residents of PuertoRico.

The allowable deduction for charitable entities must be includedon page 2 of Schedule A Individual, Part III (Medical Expensesand Charitable Contributions), Column B.

The name of the entity and the employer identification numbermust be included in the space provided and the amount of thecontribution will be included in Column B. In the next Column,you must include a code letter (as listed below) correspondingto the category of the nature of the organization to which adonation was made.

The categories are the following:

A. Social Services – this includes entities for the preventionof abuse or violence, such as Casa Protegida Julia deBurgos, Puerto Rico Youth at Risk, Inc. (Jóvenes de PuertoRico en Riesgo), Taller Salud, Niños de Nueva Esperanza,Casa La Providencia, Centro de Renovación y DesarrolloHumano Espiritual Buen Pastor, La Casa de Todos, LaFondita de Jesus, and Proyecto Aurora.

B. Art and Culture – Examples: Andanza, Coro de Niños deSan Juan, Pro Arte Musical, and Casa Pueblo.

C. Housing Services

D. Educational and Research Services – Examples: CentroEsperanza, Asesores Financieros Comunitarios, PolitécnicoAmigo, CreArte, Nuestra Escuela, Scuba Dogs Society,Asociación Educativa Pro Desarrollo Humano de Culebra,and Centro de Periodismo Investigativo

E. Recreation and Sports Services – Examples: YMCAde San Juan, and Boys and Girls Club of Puerto Rico.

F. Economic, Social and Community Development –Examples: Coalición Pro Corredor Ecológico del Noreste,

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The charitable contributions in excess of the limit allowed maybe carried over to the 5 subsequent taxable years.

You may claim an unlimited deduction for charitablecontributions, if the amount of qualified charitable contributionsplus the total amount of income taxes paid during the taxableyear and in each of the 10 preceding taxable years, exceed90% of your net income for each one of those years, computedwithout the benefit of the charitable contributions. Net income isthe adjusted gross income less the applicable deductions totaxpayers that are individuals and the exemptions (additionalfor veterans, personal and for dependents), as applicable.

Charitable Contributions to Municipalities and Other Contributions

Donations to municipalities must be included in Column D andyou must include in the corresponding area the name andemployer identification number of the municipality that receivedthe donation.

The contributions of historic or cultural value made to amunicipality, as certified by the Institute of Puerto Rican Cultureor the Cultural Center of each municipality, or that makes possiblethe realization of any cultural or historic work, may be claimedas charitable contribution when the amount is $50,000 or more,and is made in connection with the celebration of the centennialestablishment of the municipality. The total of said contributionsis not subject to the limitations provided by the Code. Itemizethese contributions in Part III, Column D of this Schedule.

Likewise, any contribution made to the Puerto Rico PublicBroadcasting Corporation, as provided by Article 4 of Act 216-1996, as amended, will not be subject to the limitations establishedby the Code. To claim the total amount of charitable contribution,you must indicate in the corresponding spaces of Part III, ColumnD of this Schedule, the name of such Corporation, the employeridentification number and the amount contributed.

To claim these charitable contributions, complete PartIII of this Schedule and transfer to this line the totalamount determined on line 8. You must keep for yourrecords copy of the cancelled or substitute checks,receipts or certifications evidencing the payments made.

Line 5 - Enter losses of automobiles, furniture, fixtures andother household goods (excluding the value of jewelry andcash), not compensated by insurance or in any other form,occurred during the taxable year due to earthquakes,hurricanes, storms, tropical depressions and floods. Thededuction is limited to $5,000 ($2,500 if married filing separatelyor if you choose the optional computation of the tax) for the yearin which the loss was incurred.

The amount of said $5,000 not claimed in the year in which theloss occurred may be carried over to the next two consecutivetaxable years as a loss of personal property due to casualties.In order to be entitled to this deduction, the affectedarea must be declared as a disaster area by the Governorof Puerto Rico, and you must have claimed at theappropriate place within the time limit to do so, thebenefits from the assistance programs approved fordisaster events.

An individual resident of Puerto Rico for the taxable year 2020and that remains as resident at the moment of file the 2020Return, may be eligible to claim the deduction for losses withrespect to automobiles, furniture, fixtures and other householdgoods suffered as consequence of the seismic activity that beganon December 28, 2019. The deduction shall be available only

to individuals who have been residents of any of the designatedareas in the Disaster Declaration issued by the Governor. Fordetails of additional requirements to claim this deduction andrequired evidence, refer to the publications issued by theDepartment for these purposes.

You must keep for your records copy of the approvedclaim filed stating the damages suffered.

Line 7 - Enter on this line the contributions made to a qualifiedIndividual Retirement Account (IRA). The maximumdeduction for an individual is $5,000 or the adjusted grossincome from salaries or the earnings attributable to professionsor business, whichever is less.

In order to claim this deduction, the IRA must be in a trustcreated or organized under the laws of the Government ofPuerto Rico, among other requirements.

In case of married taxpayers filing a joint return, including thosewho choose the optional computation of tax (Schedule COIndividual), each one may establish, individually, his/her ownIRA, or one of the spouses may establish an IRA for himself/herself and another IRA in the name of the other spouse, withoutconsidering if he/she receives income. The contribution cannotexceed $10,000 or the aggregated adjusted gross incomefrom salaries and the earnings attributable to professions orbusiness, whichever is less. However, the deduction for eachspouse cannot exceed $5,000.

No deduction is allowed for the taxable year in which theindividual has reached 75 years of age or more at the end ofthe taxable year. Also, no deduction will be allowed if theincome received during the year is from pensions orannuities.

The taxpayer will have until the due date established by theCode to file the return, or until the due date of any extension oftime granted by the Secretary to file the return, to make acontribution to his/her IRA.

In the spaces provided on this line, enter the name andemployer identification number of the financialinstitution, the account number, and the totalcontributions made, as they correspond to the taxpayeror the spouse.

If the taxpayer participates in a pension plan qualified by theDepartment of the Treasury and the IRS (dual qualified plan)or is a federal employee, the sum of the contribution to thepension plan plus the contribution to the IRA cannot exceed$20,000. In other words, the sum of his/her contribution to thepension plan (Box 15 of Form 499R-2/W-2PR or thecorresponding box of Federal W-2 Form) plus the contributionto the IRA cannot exceed $20,000.

You must keep for your records the Informative Return -Individual Retirement Account (Form 480.7) provided bythe bank or institution in which you opened the account.

Line 8 - Enter the cash contributions to an educationalcontribution or my future account for the exclusive benefit of achild or relative up to the third degree of blood relationship orsecond degree by affinity. The maximum contribution amountthat can be claimed cannot exceed $500 for eachbeneficiary.

An educational contribution account must be established by theindividual who has the custody and parental rights over thebeneficiary for whom the account was established.

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In the case of my future account, the trust is created or organizedby the Government of Puerto Rico (Government) for theexclusive benefit of students in the public education system ofthe Government or, subject to the corresponding regulation, forthe benefit of students of private schools in Puerto Rico. In thisaccount, the Government will make an initial contribution of$1,000 per each eligible beneficiary and after established, anindividual or private entity can made annual contributions incash not exceeding the maximum amount allowable to aneducational contribution account.

There is no limitation in the number of educational contribution ormy future accounts to which each individual can contribute, aslong as such beneficiary is eligible. Under no circumstances, thetotal contributions for each beneficiary account can exceed $500.

This deduction will not be allowed for a taxable year in whichthe beneficiary has reached the age of 26 by the end of suchtaxable year.

The taxpayer can make the contribution to the accounts untilthe last day established by the Code to file the return, or until thedue date of any extension of time granted by the Secretary tofile the same.

Transfer to this line the total of Part II, line 16 of Schedule A1Individual.

You must keep for your records the certification issuedby the institution that receives the contributions.

Line 9 - Enter on this line the total of interest paid and thecorresponding amount of the principal paid in a student loan atuniversity level. In the spaces provided on this line, enter thename, loan number and employer identification number of thefinancial institution. The amount to be included is the sum of interestand the part of the principal paid during the year, as applicable.

It shall be allowable as deduction the amount of interest paid oraccrued during the taxable year on debts incurred for studentloans to cover expenses of the taxpayer, his/her spouse ordependent for tuition, teaching and textbook at university level,as well as the related expenses of transportation, meals andlodging in those cases in which you have had to live outsideyour home in order to study. You must keep for your recordsthe certification of the bank or financial institution as evidence ofthe deduction claimed.

On the other hand, it will also be allowed as special tax deduction,25% of the payments made to the principal of student loanstaken for university college studies, or 50% of payments whenthe student loan is taken for postgraduate studies, provided thatit is eligible under Article 5 of the Incentive Act for the Retentionof Talent in Puerto Rico (Act 24-2015) up to a maximum of$5,000 per taxable year. This deduction cannot be taken by anindividual for more than 10 taxable years.

The taxpayers that will be eligible to receive the specialdeduction are those who have the evidence and who meet allthe requirements listed below:

(a) Be a citizen of the United States and resident of theCommonwealth of Puerto Rico for the purposes of the Code;

(b) Have completed a degree in a university institution on asub-graduate or graduate level;

(c) Provide an official copy of the graduation diploma issuedby a university institution that evidences having completedsuch studies at the sub-graduate or graduate level;

(d) Have made monthly payments on the principal of a federalstudent loan eligible for the Public Service LoanForgiveness Program and submit the official documentationcertifying the payments made (once monthly payments aremade, the taxpayer must submit to the Department ofEducation of the United States the Employment Certificationfor Public Service Loan Forgiveness duly completed);

(e) The taxpayer must provide the Response to theEmployment Certification for Public Service LoanForgiveness Program in which it is certified that it meets allthe necessary and indispensable requirements to qualifyfor the Public Service Loan Forgiveness Program; and

(f) At the time of making the monthly payments described inthe previous paragraph (d), the person must be employedfull time in any of the three branches of the Government ofPuerto Rico, its agencies or public corporations; at theUniversity of Puerto Rico; in the office located in PuertoRico of any of the three branches of the FederalGovernment, its agencies or public corporations; or at theoffice of any eligible nonprofit organization located in PuertoRico.

PART II – COMPUTATION OF ALLOWABLE AMOUNTS OFDEDUCTIONS TO NONRESIDENT OR PART-YEARRESIDENT

If in the questionnaire it was indicated that the taxpayer was anonresident or a part-year resident, use this part to determinethe total deductions attributable to the period of residence inPuerto Rico. Follow the guides provided on each line. Marriedtaxpayers who are filing their return under the optionalcomputation of tax, shall not use this part, they will made thiscalculation in Part IV of the Schedule CO Individual.

PART III – MEDICAL EXPENSES AND CHARITABLECONTRIBUTIONS

Use this Part to determine the deduction for medical expensesand charitable contributions that you will claim on your return.You must provide a detail of each medical expense orcontribution that you made during the year.

See full details for these deductions in the instructionsto complete Part I, lines 3 and 4 of this Schedule.

It is very important that you enter the name of the institution towhom the payment was made and the amount paid, as well asto keep for your records evidence to support yourpayment. In the case of charitable contributions, you must alsoindicate the employer identification number of the entity to whichthe payment is made.

Transfer the amount of the allowable deduction for medicalexpenses from line 3 to Part I, line 3 of this Schedule. Transferthe total amount of the allowable deduction for charitablecontributions from line 8 to Part I, line 4 of this Schedule.

SCHEDULE A1 INDIVIDUAL - DEPENDENTS ANDBENEFICIARIES OF EDUCATIONAL CONTRIBUTIONACCOUNTS AND MY FUTURE ACCOUNTS

In order to process the information of your dependents andclaim the exemption, you must complete this Schedule andsubmit it with your return.

Use the number of Schedules A1 Individual that are necessaryand indicate the amount in the upper right corner of the header.

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REMINDER: To claim the deduction for dependents thetaxpayer must provide more than half of the support forthe dependent, as provided on the Code and thecorresponding Regulations.

PART I - DEPENDENT'S INFORMATION

The term dependent means:

1) a person who at the end of the calendar year in which thetaxpayer’s taxable year begins has not reached the ageof twenty-one (21);

2) the taxpayer’s father or mother;

3) a person who is age sixty-five (65) or older;

4) a person who has reached the age of 21 or more and isblind or incapable of self-support because of being mentallyor physically disabled; or

5) a university student who at the end of the calendar year inwhich the taxpayer’s taxable year begins has not reachedthe age of twenty-six (26), as long as he/she hascompleted as a regular student, at least one semester in auniversity or technical - professional institutionrecognized as such by the educational authoritiesof Puerto Rico, or of the applicable country, untilhe/she receives his/her degree.

Notwithstanding the above, to be entitled to claim a dependent,you must comply with the following requirements:

1) the person claiming the dependent must provide morethan half of the support for the dependent during thecalendar year in which the taxpayer’s taxable year began;

2) the dependent’s gross income for the calendar year inwhich the taxpayer’s taxable year began is less than theamount allowed as an exemption for this concept ($2,500).Nevertheless, if the dependent is your child and also aregular student, he/she may earn gross income of up to$7,500, and you still have the right to claim him/her as adependent.

In the case of children from divorced or separated parents, theexemption for dependent will be claimed by the parent who hasthe legal custody of the child. However, the parent who has thelegal custody may release his/her right to claim the exemptionin favor of the parent who does not have that custody. Therelease should be made using Schedule CH Individual -Transfer of Claim for Exemption for Child (Children) of Divorcedor Separated Parents. The parent to whom the right to claim theexemption was released must kept for his/her records ScheduleCH Individual duly completed and signed (See Instructions ofSchedule CH Individual).

However, in the case of parents that are separated, divorcedor do not have a right to file as married, and that have jointcustody of their child, the dependent exemption will be dividedin half between both parents. The joint custody must have beendeclared by a competent court or must comply with the definitionestablished under Act 223-2011. In order for each parent to beable to claim half of the exemption, select the oval in thecolumn of Joint Custody. However, one of the parents mayclaim the total exemption if the other parent releases in writinghalf of the exemption by using Schedule CH Individual, whichmust be keep for your records.

In the case of parents who are married, living together andelect to file a separate return, each spouse is entitled to claimhalf of the total exemption for dependents, as in the case ofthose who choose the optional computation of tax.

An individual required to file a joint return with his orher spouse does not qualify as a dependent.

Nonresident aliens of Puerto Rico do not qualify asdependents.

If the dependent is totally or partially blind, keep for your recordsa certificate from an ophthalmologist or optometrist indicating thevisual condition of the dependent.

If you claimed the exemption for dependents who are universitystudents, or who are disabled, blind or age 65 or older, youmust keep for your records the evidence that entitles you toclaim the exemption for those dependents.

In the space provided, select the oval that indicates “jointcustody” (if applicable), and write the complete name,date of birth, relationship and social security number ofall dependents for whom you claim an exemption on yourreturn. Also, classify the dependents in one of thefollowing categories:

Category Class

(N) Non university

(U) University students

(I) Disabled, blind or age 65 or older

If you do not comply with these requirements, the exemptionmay be disallowed. Remember that you must include the socialsecurity number of all dependents who are age one (1) orolder at the end of the taxable year.

Eligible Dependents for Employment Credit

Those dependents who meet the following requirements shallbe considered eligible to determine the employment credit:

1. only the children of the taxpayer or spouse, which wereclaimed as dependents in their return;

2. that on the last day of the taxable year they are age 18 oryounger, and in the case that they are full-time students,they will be considered as dependent if they do not exceedage 25 on the last day of the taxable year; and

3. have been residents of Puerto Rico throughout the taxableyear for which the credit is claimed and at the time of filingthe return.

For additional details related to these requirements andthe computation of the employment credit, refer to theInternal Revenue Circular Letter No. 20-01 of January 3,2020.

PART II - BENEFICIARIES OF EDUCATIONALCONTRIBUTION ACCOUNTS AND MY FUTUREACCOUNTS

In the space provided, write the complete name,relationship, date of birth, and social security number ofthe beneficiaries for whom you made contributions to anEducational Contribution Account or to My Future Account andidentify the type of account you contribute. Indicate also thename and employer identification number of the financial institution,

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and the account number where the contributions are made. Youmust also enter the amount of said contributions.

For information regarding who qualifies for thisdeduction and its limitations, refer to the instructionsof Part I, line 8 of Schedule A Individual.

SCHEDULE A2 INDIVIDUAL - TAX ON INCOME SUBJECTTO PREFERENTIAL RATES

Complete this Schedule if during the taxable year your receivedincome subject to preferential rates such as: net long-term capitalgain, interests paid or credited on deposits held on certainfinancial institutions or dividend distributions of certaincorporations. Also, if your income subject to preferential rates isequal to or more than $20,000, this Schedule provides for thecalculation of the limitation of Deductions Applicable to IndividualsTaxpayers required by Section 1033.20 of the Code.

If you are a married taxpayer which elected the optional computationof tax and received income subject to preferential rates required tobe attributable to each spouse based on 50% of the total (e.g.interests and dividends), you must complete a Schedule A2 foreach spouse. Identify on the superior part if the Schedule belongsto the taxpayer, spouse or both, as applicable.

Line 1 - Transfer the Adjusted Gross Income determined inPart 1, line 5 of the return or Part I, line 6 of Schedule COIndividual, as applicable. The Adjusted Gross Income mustconsider all income subject to preferential rates, as informed onthe other corresponding schedules of the return.

Line 4 – Transfer to Column A and to the correspondingColumns from B to H the different types of income subject topreferential rates as identified on lines 4(a) through 4(l). InColumn B, include the income subject to a 20% rate; in ColumnC, those subject to a 15% rate; in Column D, those subject to a10% rate; and in Column E, those subject to a 4% rate.

If you received income subject to a rate other than 4%, 10%,15% or 20% under any special act, specify the applicablepreferential rate in the blank space provided for it in Columns F,G and H and include such income in the corresponding Column.The sum of the amounts entered in Columns B through H mustbe the same amount to be transferred to Column A of this line.

Line 4(a) - Transfer to Column A of this line the amount shownon line 7 of Part VII of Schedule D Individual (Schedule D).

As a general rule, the applicable rate on a realized capital gainis 15%. In such case, include in Column C of this line theamount shown on line 6(a), Column B of Part VII of Schedule DIndividual, if any.

However, all or part of the long-term capital gain can be taxedat a different rate, if it was realized under a special legislation. Insuch case, enter as it corresponds in Columns F, G and H ofthis line, the amount shown on line 6(b), Columns C through Eof Part VII of Schedule D Individual, if any.

It is important to note that if a net capital loss not used in previousyears is claimed, Part VI of Schedule D Individual must becompleted to determine the amounts that shall be transferred tothis line.

Line 4(d) - Transfer to Column A of this line the amount shownon line 4, Column E of Part I of Schedule FF Individual. Intereston IRA distributions to Government pensioners are taxed at apreferential rate of 10%. Therefore, include the same in ColumnD of this schedule.

Line 4(h) - Transfer to Column A of this line the amount shownon Schedule D Individual, Part IV, line 25. As a general rule,the applicable rate on total distributions from pension plans is20%. Therefore, include distributions subject to the 20% rate inColumn B and distributions subject to a preferential rate of 10%(if they meet certain requirements set forth in Section 1081.01(b) of the Code) in Column D. For additional information, seeinstructions of Part IV of Schedule D Individual.

Line 4(i) - Transfer to Column A of this line the gain determinedon Schedules J, K, L, M or N Individual, as applicable, taxableat a reduced rate under an Incentives Act or wages receivedby a qualified physician who has a decree under Act 14-2017or Act 60-2019 and that have been reported separately in thespaces provided on lines 1B and 1C of Part I of the return orlines 1 and 2, Part I of Schedule CO Individual, as applicable.Include this amount in Columns B through H, as it corresponds,according to the applicable preferential rate.

Line 4(j) - Transfer to Column A of this line the amount on line3, Column F, Part V of Schedule F Individual. Include thisamount in Columns B through H, as it corresponds to theapplicable preferential tax rate.

Line 4(k) - Include on this line any other income subject to apreferential rates not specified on lines 4(a) through 4(j) and4(l), and distribute it in the corresponding Column, under theapplicable preferential rate.

Among others, also include on this line the distributions andtransfers of Governmental Plans reported on Schedule FIndividual, Part II, line 2, Columns E or F. The lump-sumdistributions of Savings Account Plans of $10,000 or more andthe transfers from such plans to Non Deductible IndividualRetirement Accounts are subject to a preferential rate of 10%.Include these amounts in Column D. Also include the incomefrom other interests subject to withholding under the provisionsof special legislation reported on Schedule FF Individual, PartI, line 4, Column F.

Line 4(l) - Transfer to Column A of this line the amount reflectedon Schedule F Individual, Part VI, line 5, corresponding toEligible Distributions from Retirement Plans or IRAs that werereceived for reason of extreme economic emergency due to adisaster declared by the Governor of Puerto Rico. Thesedistributions are taxed at a preferential rate of 10%. Therefore,include them in Column D of this schedule.

Line 5 - Add line 4(m) of Columns B through H (you can alsoadd lines 4(a) through 4(l) of Column A). This is your totalincome subject to preferential rates. If this amount is less than$20,000, the Deductions Applicable to Individual Taxpayersare not subject to limitation. Therefore, enter on line 7,100% in Column A and 0% in Columns B through H. Also, enterthe total amount shown on line 8(a) on line 8(b), Column A.

Line 6 – The Adjusted Gross Income specified on line 3 lessthe total income subject to preferential rates specified on line 5,constitutes the income that is subject to regular tax according tothe tables.

Line 7 - If your total income subject to preferential rates on line5 is $20,000 or more, calculate on this line the proportion ofeach income subject to preferential rates and the remainingincome subject to regular tax in relation to the total AdjustedGross Income. Divide line 6 by line 3 and line 4(m) of eachColumn from B through H by line 3. Enter the applicablepercentage rounded to the nearest whole number in thecorresponding column of this line.

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Line 8(a) - Transfer to this line the Applicable Deductions toIndividual Taxpayers as determined on Schedule A Individual,Part I, line 11 (or Part II, line 6 in the case of nonresidents orpart-year residents) or Schedule CO Individual, Part II, line 3(or Part IV, line 6 in the case of nonresidents or part-yearresidents). These are the only deductions that are subject tothe limitation proportional to the income subject to the preferentialrates.

Line 8(b) - Multiply line 8(a) by the applicable percentagedetermined on line 7 for each Column. This amount reflects theportion of Deductions Applicable to Individuals Taxpayers thatare attributed to each type of income subject to regular ratesand preferential rates.

Lines 8(c) through 8(e) - Transfer the correspondingamounts from Part 2 of the return or the corresponding lines ofSchedule CO Individual, as applicable. These deductions andexemptions are not subject to the limitation or the proportionaldistribution. Therefore, all of them will be reduced from theincome subject to regular rates.

Line 8(f) - Add the total deductions and exemptions. ForColumns B through H, this total will be equal to the amountdetermined on line 8(b), which is the proportion of DeductionsApplicable to Individual Taxpayers that are applicable to eachtype of income subject to preferential rates.

Line 9 - Distribute among Columns A through H, as it is morebeneficial to you, the amount of alimony paid indicated in Part 1,line 4 of page 2 of the return or Part I, line 5, Column B or C ofSchedule CO Individual.

Line 10 - Distribute among Columns A through H, as it is morebeneficial to you, the amount of the allowable deduction forPrivate Equity investment indicated in Part 2, line 12 of page 2of the return or in Part II line 10, Column B or C of Schedule COIndividual.

Line 11 - For Column A, subtract lines 8(f), 9 and 10 from line6. For Columns B through H, subtract lines 8(f), 9 and 10 fromline 4(m) of each individual column.

Line 12(a) - Determine the tax applicable to the income on line11, Column A according to the regular tax table available onpage 19.

Line 12(d) - Section 1021.01(c) of the Code provides for areduction in the normal tax that will depend on your grossincome level. To determine the amount of your gross income,add the amounts on lines 1B, 1C, 2A, 2B, 2E, 2F, 2H, 2I, 2J,2L, 2M, 2N and 2O and the line of total (Total $ ________)included on lines 2C, 2D, 2G, 2K and 2P through 2T, Part 1 ofthe return, plus the exempt income from line 43 less lines 2D,31B through 31F, and 37 through 42, first Column, Part II ofSchedule IE Individual.

• If your gross income does not exceed $100,000 - Multiplythe amount on line 12(c) by .92.

• If your gross income is more than $100,000 - Multiply theline 12(c) by .95.

If you choose the optional computation of tax, to determine yourgross income add the amounts on lines 1, 2, 3A, 3B, 3E, 3F, 3H,3I, 3J, 3L, 3M, 3N and 3O and the line of total (Total $ ________)included on lines 3C, 3D, 3G, 3K and 3P through 3T of Part I,Schedule CO Individual, plus the exempt income item derivedfrom subtracting from line 43 lines 2D, 31B through 31F, and 37through 42, first Column, Part II of Schedule IE Individual.

Line 13 - Determine the tax applicable to the income on line 11according to the corresponding rate for Columns B through H.For Column B, multiply the income on line 11 by 20%. ForColumn C, multiply the income on line 11 by 15%. For ColumnD, multiply the income on line 11 by 10%. For Column E, multiplythe income on line 11 by 4%. For Columns F, G and H, multiplythe income on line 11 by the rate specified in each column,which cannot be 4%, 10%, 15% or 20%.

Line 16(a) - Determine the tax applicable to the income on line15 (line 13 of Part 2 of the return or line 11, Part II, Columns Bor C of Schedule CO Individual) according to the regular taxtable available on page 19. This is your tax amount withoutconsidering preferential rates applicable to certain income.

Line 16(d) - Section 1021.01(c) of the Code provides for areduction in the normal tax that will depend on your grossincome level. To determine the amount of your gross income,add the amounts on lines 1B, 1C, 2A, 2B, 2E, 2F, 2H, 2I, 2J,2L, 2M, 2N and 2O and the line of total (Total $ ________)included on lines 2C, 2D, 2G, 2K and 2P through 2T, Part 1 ofthe return, plus the exempt income from line 43 less lines 2D,31B through 31F, and 37 through 42, first Column, Part II ofSchedule IE Individual.

• If your gross income does not exceed $100,000 - Multiplythe amount on line 16(c) by .92.

• If your gross income is more than $100,000 - Multiply theline 16(c) by .95.

If you choose the optional computation of tax, to determine yourincome add the amounts on lines 1, 2, 3A, 3B, 3E, 3F, 3H, 3I,3J, 3L, 3M, 3N and 3O and the line of total (Total $ ________)included on lines 3C, 3D, 3G, 3K and 3P through 3T of Part I,Schedule CO Individual, plus the exempt income item derivedfrom subtracting from line 43 lines 2D, 31B through 31F, and 37through 42, first Column, Part II of Schedule IE Individual.

Line 17 - Compare the tax determined on line 14 with the onedetermined on line 16(d) and choose the smaller amount.Transfer this amount to page 2, Part 3, line 14 of the return or toline 1, Part III, Column B or C of Schedule CO Individual, if youelected for the optional computation of tax in the case of marriedtaxpayers. Choose in the return or Schedule CO Individual, theoval corresponding to the selected line as indicated on thisSchedule.

In this case, line 14 of Schedule A2 Individual include the gradualadjustment and the corresponding reduction on the normal tax,if applicable. Therefore, when the amount on this line 17 istransferred to the Line 14, Part 3 of the return, the adjustmentshave been considered, so line 15 will be zero and lines 16 and17 will be the same as line 14. In the same way, on the ScheduleCO Individual, Part III, line 2 will be zero and lines 3 and 4 willbe equal to line 1.

SCHEDULE B INDIVIDUAL - RECAPTURE OFCREDITS CLAIMED IN EXCESS, TAX CREDITS, ANDOTHER PAYMENTS AND WITHHOLDINGS

Use this schedule to determine the recapture of credits claimedin excess, tax credits, and other payments and withholdings.

Remember that from taxable year 2019, all return must be filedelectronically. All the evidence that is required to include with thereturn to support any credit claimed in Part II of this Schedulemust be filed through SURI.

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PART I - RECAPTURE OF CREDITS CLAIMED IN EXCESS

You must indicate in Columns A, B and C the name and employeridentification number of the entity to which the investment creditclaimed in excess belongs to. Also, you must select the oval thatidentifies the act under which the investment or donation was made.

Enter the credit claimed in excess in previous years as a resultof the intervention of the Secretary or Director of the Agency orDepartment, or the Board that regulates each of the followingacts: Puerto Rico Tourism Development Act (Act 78-1993, asamended), Solid Waste Authority Act (Act No. 70 of June 23,1978, as amended), Capital Investment Funds Act (Act No. 3 ofOctober 6,1987, as amended), Act for the Creation of theTheatrical District of Santurce (Act 178-2000, as amended), Actfor the Development of the Film Industry (Act 362-1999, asamended), Puerto Rico Film Industry Economic Incentives Act(Act 27-2011, as amended), Act for Tax Credits for Investmentin Housing Infrastructure (Act 98-2001, as amended), Act forTax Credits for Investment in the Construction or Rehabilitationof Rental Housing Projects for Low or Moderate Income Families(Act 140-2001, as amended), Economic Incentives for theDevelopment of Puerto Rico Act (Act 73-2008) and ConservationEasement Act (Act 183-2001, as amended).

The total investment carried out by the exempt business in theproject is subject to the revision of the Secretary or Director ofeach Agency or Department, or the Special Work Board (Board)in case of the Theatrical District of Santurce. If the investmentcredit claimed by the investors exceeds the investment creditcomputed by the Secretary, the Director or the Board, thisexcess shall be due as income tax. In some cases this debtmust be paid by the investors in one installment, and in othercases in two installments beginning with the first taxable yearfollowing the date in which the unfulfillment or revocation of thecredits is determined or any other date provided by law. TheDirector, the Secretaries or the Board will notify the Secretaryof the Treasury the excess of credit claimed by the investors.

The provisions of the recapture of credit mentionedbefore will not apply to the participants or investorsthat are not developers in a project under the PuertoRico Tourism Development Act and the Puerto Rico SolidWaste Authority Act.

On the other hand, the provisions of the recapture of thecredit under the Agricultural Tax Incentives Act will applyto the investors or participants in agricultural businesses.

In the case of condo hotels, the operator of the integrated rentalprogram should send an annual report to the Director and theSecretary identifying the units participating in the integrated rentalprogram. Such report must indicate the aforementioned programbeginning dates with respect to the participating units, as well asthe date or dates in which one or more units were withdrawnfrom the program.

In case of Act 178-2000 (theatrical business), Act 140-2001(rental housing), and Section 6 of Act 73-2008 (business closingoperations), if any unit or business is withdrawn from theprogram, ceases its operations or does not comply with any ofthe requirements provided by the corresponding law beforethe expiration of the 10 year period or other period providedby law, the investor will owe as income tax an amount to becomputed as provided by law or as follows, as applicable:

Income Total investment credit Balance of theTax Owed = claimed per unit or business x 10 year period 10

In case of owners of a levied property or donors of aconservation easement, in case of an eligible land, they shallbe subject to the recapture of the tax credits granted, in theevent that the obligations included in the constitution deed of theconservation easement or donation of an eligible land are notfulfilled, as applicable, but only in those cases in which it isimpossible to return the land to its original condition. Thesedispositions will also apply when the perpetuity requirement isnot fulfilled by the owners and the titular of the easement.

The income tax amount owed must be paid in one or twoinstallments, whichever applies, beginning with the first taxableyear following the date of the withdrawal of the unit, the firsttaxable year following the cease of operations or any otherdate provided by law.

Line 1 - Enter the total excess of credit notified by the Director,the Secretary or the Board, or in case of condohotels, theatricalbusiness, business closing operations or rental housing projectsfor low income families, the total of income tax debt according tothe formula previously mentioned or as established by law.

Line 3 - Multiply line 1 by 50% and enter the result here.Transfer the result to Part 3, line 24 of the return. In case thatyou had paid part of the recapture of excess of credit in theprevious year, enter the difference owed.

Line 4 - If this is the first year in which you make the recapture,subtract line 3 from line 1 and enter the difference. This will bethe tax debt to be paid for next year. If this is your second yearof recapture, subtract lines 2 and 3 from line 1.

PART II - TAX CREDITS

On March 7, 2017, the Financial Advisory Authority and FiscalAgency of Puerto Rico ("AAFAF", for its Spanish acronym)issued Administrative Order No. OA-2017-01 ("OA-2017-01")by which it created the Disbursements and Tax ConcessionsAuthorization Committee ("CADCC", for its Spanish acronym)to which it granted certain authorizations regarding theevaluation and granting of tax credits and delegated theresponsibility of establishing limitations regarding the use andavailability of the tax credits granted. Also, OA-2017-01 orderedthe Secretary of Treasury ("Secretary") to carry out aninventory of the tax credits granted and to require the holdersof tax credits to report the amount granted of said credits, in themanner that the Secretary establishes for said purposes. Theadministrative order also establishes that, any credit holder thatdoes not show evidence issued by the Secretary of compliancewith the information requirement, will not be able to claim saidtax credits.

For such purposes, on April 20, 2017, the Department of theTreasury issued the Internal Revenue Informative Bulletin No.17-08 to notify that the requirement to carry out the inventory oftax credits would be met by electronically filing Form 480.71.1(Informative Return for Tax Credits Holders) and establishedthat the requirement imposed by AAFAF to submit evidence ofcompliance with the information requirement in order to claimthe tax credits, would be met by electronically filing Form480.71.1. Therefore, in order to claim a tax credit that has beengranted and available as of April 19, 2017, it must be includedin Form 480.71.1 that the credit holder submitted to theDepartment.

For its part, on July 2, 2018, AAFAF, through AdministrativeOrder No. OA-2018-10 ("OA-2018-10"), repealed the OA-2017-01 and left the CADCC without effect prospectively. Forsuch purposes, Section 1051.15(b)(1) of the Code providesthat for taxable years commenced after December 31, 2017,the tax credits will not be subject to the limitations set forth in the

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resolutions issued by the CADCC during its existence, therefore,they will be subject only to the rules of use established in thespecial law under which the tax credit is granted and theapplicable provisions of the Code. However, credits coveredunder Section 1051.12(a)(4), (5) and (7) of the Code will besubject to the use limitation provided in Section 1051.13 of theCode.

However, OA-2018-10 establishes that the Secretary willcontinue to perform and maintain the inventory of all tax creditsand maintains the requirement of the OA-2017-01 that the creditholder must show evidence issued by the Secretary of thecompliance with the information requirement to be able to claima tax credit.

In order to claim a tax credit granted and available as ofApril 19, 2017 on lines 1, 2, 3, 4, 5, 12, 14, 15 and 19 in thisPart II, you must submit with your return copy of Form480.71.1 duly filed with the Department. The form mustbe filed through SURI.

Credits claimed but not used in previous years should be reportedon lines 7 and 22 of this Part II. Lines 1 through 6, 8,12 through21 and 23 of this Part II should only be used to claim creditsgenerated or acquired during the current taxable year.

A. Credits Subject to Moratorium:

Line 1 - Enter the amount determined on Schedule Q. Youmust submit Schedules Q and Q1 to claim this credit, as well asother forms that indicate the credit earned for the investment inthe different capital investment funds or direct investments.

In order to claim such credit, you must submit with your returncopy of the certification issued by the pertinent agencies andcopy of a sworn statement issued by the agency indicating thedistribution or allocation of the credit.

Line 2 - Enter the amount of the credit to be claimed forinvestment in housing infrastructure recommended by thedesignated officials of the Department of Housing and theDepartment.

Act 98-2001, as amended, provides a tax credit for investmentin infrastructure to developers of housing projects. This credit issubject to the taxpayer's request and the approval by theSecretary of an administrative determination under Act 98-2001and the applicable regulations. You must submit with the returncopy of the Administrative Determination issued by theDepartment.

For additional details, refer to Act 98-2001 and itsregulation.

Line 3 - Enter the amount of credit for investment in constructionor rehabilitation of rental housing projects for low or moderateincome families; or for investment in the acquisition, constructionor rehabilitation of affordable rental housing to the elderly.

Act 140-2001, as amended, establishes that any owner of arental housing project for low or moderate income families or ofaffordable rental housing to the elderly may qualify for a taxcredit. The petitioner must file an application with the HousingFinancing Authority.

The tax credit will be subject to the taxpayer's request and theapproval by the Secretary of an administrative determination.You must submit with the return copy of the AdministrativeDetermination issued by the Department.

Line 4 - Enter the amount of credit for construction investment inurban centers. Every person who carries out a construction orimprovement project in a urban center, as provided by law,may qualify to claim a credit against the tax.

The concession of the credit is subject to the taxpayer’s requestand the approval by the Secretary of an administrativedetermination. You must include with the return copy of theAdministrative Determination issued by the Department.

The taxpayer must include with the return for every year inwhich the credit is claimed, a schedule detailing the year inwhich the credit is available to be used, the taxable years inwhich it has been claimed, the expiration date of the credit, totalamount of the credit, and the amounts claimed in previous years.

For additional details, refer to Act 212-2002, as amended,and the corresponding regulations.

Line 5 - Enter the amount of credit for the establishment anddonation of a conservation easement. The concession of thecredit is subject to the taxpayer's request and the approval bythe Secretary of an administrative determination. You mustinclude with the return copy of the Administrative Determinationissued by the Department.

The taxpayer must also include with the return for every yearin which the credit is claimed, a schedule detailing the year inwhich the credit is available to be used, the taxable years inwhich the tax credit has been claimed, the expiration date of thecredit, the total amount of the credit, and the amounts claimed inprevious years.

For additional details, refer to Act 183-2001, as amended,and to Internal Revenue Circular Letter No. 05-04 ofMarch 23, 2005.

Line 6 - Enter here the tax credit acquired by the investorduring the year through the purchase, exchange or transferincluded in the list of credits subject to moratorium under Sections1051.11 and 1051.12 of the Code, including the amount of thistype of credit acquired by a pass-through entity through thepurchase, exchange or transfer and that has been attributed,transferred or distributed to the partners, members orstockholders.

See instructions of Schedule Q in order to know the percentagesand limitations to claim on the return.

To claim this credit, the conveyor and the cessionary will submitwith the income tax return in the year of the cession, a swornstatement notifying the same to the Secretary. Such swornstatement will also be submitted by the cessionary with the returnfor every year in which the credit is claimed, together withsupporting documents for the credit, for example, theAdministrative Determination issued by the Department grantingthe credit and the schedule detailing the year in which the creditis available to be used, the taxable years in which the tax credithas been claimed, its expiration date, the total amount of thecredit, and the amounts claimed in previous years.

Complete Part IV of this Schedule.

Line 7 - The taxpayer must include on this line the total amountof carry forward credits determined on line 32, Part II of ScheduleB Individual of the income tax return filed for the previous yearsubject to moratorium under sections 1051.11 and 1051.12 ofthe code. The taxpayer must include with the return abreakdown including the taxable year in which the credit is

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available to be used, the amount of credit generated per taxableyear, the amount of carry forward credit per taxable year usedin previous taxable years, the taxable year in which any balanceof such credit was claimed, and the balance of credit availablefor the current taxable year.

You must submit evidence of the credit that is being claimed, forexample, the Administrative Determination issued by theDepartment granting the credit.

Line 8 - Enter the amount of other tax credits subject tomoratorium not included on the preceding lines.

Submit with your return a schedule detailing the creditsincluded on this line. Also, you must submit evidenceof the credits that you are claiming, for example, theAdministrative Determination issued by the Departmentgranting the credit and the schedule detailing the yearin which the credit is available to be used, the taxableyears in which the tax credit has been claimed, itsexpiration date, the total amount of the credit, and theamounts claimed in previous years.

B. Credits not Subject to Moratorium:

Line 12 - Enter the amount of credit for tourism investment.Every investor may claim a credit for tourism investment equalto 50% of its eligible investment. The credit may be claimed intwo installments: the first half in the year in which the financingfor the total construction of the tourism project was obtained andthe balance of the credit, in the following years.

To claim this credit you must include with your return SchedulesQ and Q1 duly completed.

You must submit with the return copy of the notification by swornstatement issued by said agency, where the distribution of thecredit is informed. You must also include copy of the Certificationissued by the pertinent agencies.

Line 13 - Enter the tax withheld on dividends from IndustrialDevelopment income under Act No. 8 of January 24, 1987 (Act8 of 1987) and/or 30% of your proportional share in the fixedtax rate on Industrial Development income paid by the exemptbusiness under Act 135-1997.

You must select the oval that identifies the act or acts underwhich your investment was made, and with respect to dividendsunder Act 8 of 1987, provide the required information of Box 7,Form 480.6B with the return.

Line 14 - Enter the amount of the credit to be claimed for theinvestment in a Film Entity engaged in a Film Project and/orInfrastructure Project under Act 27-2011.

The concession of this credit is subject to the taxpayer’s requestand the approval by the Secretary of the Treasury of anadministrative determination under Act 27-2011 and itsregulations. You must include with the return copy of thecertification issued by the Puerto Rico Film Corporation, whichis ascribed to the Department of Economic Development ofPuerto Rico.

For additional details, refer to Act 27-2011.

Line 15 - Enter the amount of credit to claim for the purchase ortransmission of television programming made in Puerto Rico.Every investor may claim up to 15% of the expenses paid bythe television channel in the taxable year in which the credit isclaimed.

The taxpayer must manage the annual compliance certificationthat will be issued by the Department of Economic Developmentthrough the Interagency Validation Portal for the Granting ofIncentives for the Economic Development of Puerto Rico.

For additional details, refer to Section 1051.14 of the Code.

Line 16 - Enter the amount of credit to be claimed forcontributions to former governors foundations equivalent to100% of the amount contributed during the taxable year toformer governors foundations for operating expenses andthose expenses related to the purposes for which they werecreated and/or those charitable contributions to a Depositoryof Files and Relics of Former Governors and Former FirstLadies of Puerto Rico constituted according to the provisionsof Act 290-2000 by itself or as a whole with public or privateHigher Education entities, to pay the construction, operationand all necessary expenses for the true fulfillment of thepurposes of Act 290-2000 and Section 1051.10 of the Code.The tax credits to be granted cannot exceed $500,000 inaggregate for any taxable year.

This credit will be instead of the deduction for charitablecontributions provided on Schedule A Individual.

To claim this tax credit you must submit a certification issued bythe recipient entity as evidence that the contribution was madeand accepted; that the foundation is operationally active at themoment of receiving the donation; that it has in force the Certificateof Tax Exemption issued by the Department of the Treasury;and that it complies with the required annual report to theCommission of Legislative Funds for Community Impact (asprovided in Section 1051.10 (b) of the Code). The amount ofthe credit not used in the taxable year in which the donationwas made, may be carried over to subsequent taxable years,until totally used.

For additional details, refer to Administrative Determination No.19-09 of December 28, 2019.

Line 17 - Any person to whom a certificate of membership isissued as ordinary or extraordinary member of an Employees-Owned Special Corporation, is entitled to a credit of 25% ofthe total amount paid for said certificate up to amaximum of $1,000. The credit should be claimed against theincome tax determined for the year in which the payments toacquire the certificate are made, whether totally paid or paid ininstallments in one or more taxable years, as applicable. Thecredit granted shall not be applicable against thealternate basic tax for individuals.

If the amount of credit allowed exceeds the determined incometax for the taxable year, the excess may be carried forwardduring the next two taxable years.

Refer to Section 1113.14 of the Code for qualifications andrequirements to benefit from this credit.

Line 18 - Enter 100% of contributions made to the SantaCatalina's Palace Patronage or to the Patronage of the StateCapitol of the Legislative Assembly (Patronages). The tax creditsto be granted cannot exceed $2,500,000 for any taxable year.

To claim this tax credit you must include the certification issuedby the Patronages as evidence that the contribution was madeand accepted. The amount of the credit not used in the taxableyear in which the contribution was made, may be carried overto subsequent taxable years, until totally used.

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Remember that contributions to the Patronages generatea tax credit. Therefore, such contributions cannot beclaimed as part of the deductions for charitablecontributions on Schedule A Individual.

Line 19 - Enter the amount of credit to be claimed for industrialinvestment under Section 6 of Act 73-2008. This amount mustbe equal to 50% of the eligible investment to be claimed in twoor more installments: the first half in the year in which the eligibleinvestment is completed and the balance in the subsequentyears. The maximum amount of credit for industrial investmentwill not exceed $8,000,000 for each exempt business that hasa decree granted under Act 73-2008. The Secretary of theTreasury will authorize investment credits claimed by investors,up to the limit of $20,000,000 per fiscal year.

The taxpayer must include with the return copy of theAdministrative Determination issued by the Department grantingthe credit.

The taxpayer must also include with the return for every yearin which the credit is claimed, a schedule detailing the year inwhich the credit is available to be used, the taxable years inwhich the tax credit has been claimed, its expiration date, thetotal amount of the credit, and the amounts claimed in previousyears.

That part of the credit not used in a taxable year may be carriedover to subsequent years, until totally used.

For additional details, refer to Act 73-2008 and thecorresponding regulations.

Line 20 - Enter the amount of credit to be claimed for eligibleinvestment in opportunity zone. The credit will be equal to theeligible percentage of your eligible investment and may be takenas indicated below:

• If the eligible investment is made in the year in whichthe exempt business completed the totalconstruction of the Priority Project or when theexempt business begins operations (if the priorityproject does not require construction):

The credit will be taken in four (4) installments: 25% in theyear in which the exempt business completed the constructionor when the exempt business began operations, whicheveris later, and 25% of the balance of said credit in the nextthree (3) subsequent years.

• If the eligible investment is made after the end of theconstruction of the Priority Project or that the exemptbusiness has began operations:

The credit shall be taken in four (4) installments: 25% in theyear in which a significant expansion has been made in thereal property constructed or in the exempt business, as thecase may be, and as such term is defined by the Secretaryof Economic Development through any regulations,administrative determination, circular letter, or generalinformation bulletin for these purposes, and 25% of thebalance of said credit in the next three (3) subsequent years.

Every eligible investment made during the investor's taxableyear will qualify for this tax credit, in that taxable year, as long asit meets all the requirements.

This credit may be applied against any determined tax liability ofthe investor, according to Subtitle A of the Code, including thealternate basic tax applicable to individuals.

That part of the credit not used in the taxable year, may becarried over to subsequent taxable years, until totally used.

The taxpayer must include with his return copy of theAdministrative Determination issued by the Department ofEconomic Development and Commerce granting said credit.

The taxpayer must also include with the return of every year inwhich the credit is claimed, a schedule detailing the year inwhich the credit is available to be used, the taxable years inwhich it has been claimed, its expiration date, the total amount ofthe credit and the amounts claimed in previous years.

For additional details, refer to Act 60-2019.

Line 21 - Enter here the tax credit acquired by the investorduring the year through the purchase, exchange or transferthat are not included in the list of credits subject to moratoriumunder Sections 1051.11 and 1051.12 of the Code, including theamount of this type of credit acquired by a pass-through entitythrough the purchase, exchange or transfer and that has beenattributed, transferred or distributed to the partners, members orstockholders.

See instructions of Schedule Q in order to know the percentagesand limitations to claim on the return.

To claim this credit, the conveyor and the cessionary will submitwith the income tax return in the year of the cession, a swornstatement notifying the same to the Secretary. Such swornstatement will be also submitted by the cessionary with the returnfor every year in which the credit is claimed, together withsupporting documents for the credit, for example, theAdministrative Determination issued by the Department grantingthe credit and the schedule detailing the year in which the creditis available to be used, the taxable years in which the tax credithas been claimed, its expiration date, the total amount of thecredit, and the amounts claimed in previous years.

Complete Part IV of this Schedule.

Line 22 - The taxpayer must include on this line the totalamount of carry forward credits determined on line 32, Part II ofSchedule B Individual of the income tax return filed for theprevious year not subject to moratorium under Section 1051.11and 1051.12 of the Code. The taxpayer must include with thereturn a breakdown including the taxable year in which thecredit is available to be used, the amount of credit generatedper taxable year, the amount of carry forward credit per taxableyear used in previous taxable years, the taxable year in whichany balance of such credit was claimed, and the balance ofcredit available for the current taxable year.

You must submit evidence of the credit that is being claimed, forexample, the Administrative Determination issued by theDepartment granting the credit.

Line 23 - Enter the amount of other tax credits not subject tomoratorium that were not included on the preceding lines.

Submit with your return a schedule detailing the creditsincluded on this line. Also, you must submit evidenceof the credits that you are claiming, for example, theAdministrative Determination issued by the Departmentgranting the credit and the schedule detailing the yearin which the credit is available to be used, the taxableyears in which the tax credit has been claimed, itsexpiration date, the total amount of the credit, and theamounts claimed in previous years.

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Line 12 – Enter the tax withheld reported in Part III of the InformativeReturn – Revocable Trusts or Grantor Trusts (Form 480.60 F).

Enter on line 12(a) the amount reported on lines 1(E),1(F) and1(G), Part III of Form 480.60 F; on line 12(b) the amountreported on lines 1(I) and 1(J), Part III of Form 480.60 F; online 12(c) the amount reported on line 1(A), Part III of Form480.60 F; and on line 12(d) the amount reported in any otherline, Part III of Form 480.60 F for which a specific line is notprovided on this line 12. Provide the required information of thisform with the return.

Line 13 - Enter the tax withheld reported in Part V of theInformative Return – Employees-Owned Special Corporation(Form 480.6 CPT). Provide the required information of thisform with the return.

Line 14 – Enter the 10% tax withheld on distributions from IRAor Educational Contribution Accounts of income from sourceswithin Puerto Rico, as reported in Box 8 of Form 480.7 andBox 7 of Form 480.7B.

Line 15 – Enter the 10% tax withheld on IRA distributions toGovernment pensioners, as reported in Box 9 of Form 480.7.

Line 16 - Enter the withholding reported on the InformativeReturn - Retirement Plans and Annuities (Form 480.7C) ontotal or partial distributions from deferred compensation plans(non-qualified). For additional details, refer to the instructions ofSchedule F Individual, Part III.

Line 17 – Enter the 20% or 10% withholding, as applicable,on the total distributions from qualified retirement plans receivedwithin a single taxable year due to separation from service ortermination of the plan which are reported in Boxes 6 and 7 ofForm 480.7C. For more details, refer to the instructions ofSchedule D Individual, Part IV.

Also, enter the 10% withholding on other distributions that arenot total or loans to the participant, such as withdrawals madebefore the separation from service or partial distributions madeafter separation from service reported in Box 9 of Form 480.7C.For details, refer to the instructions of Schedule F Individual,Part IV.

Include the required information of Form 480.7C.

Line 18 – Enter the tax withheld under Section 1081.01(b)(3)(B)of the Code on distributions from pension plans in the form of anannuity or periodic payments, informed in Box 5 of Form 480.7C.You must provide the required information of this form with thereturn.

Line 19 – Enter the 10% tax withheld on lump-sum distributions,in excess of your contributions, from Governmental Plans orfrom the transfer of such funds to a non deductible IRA, asincluded in Box 13 of Form 480.7C. You must provide therequired information of Form 480.7C.

For additional details, refer to the instructions ofSchedule F Individual, Part II.

Line 20 – Enter on this line the 20% tax withheld on incomefrom international associations or federations of sport’s teams,as reported in Box 4 of Form 480.6B and Box 3 of Form480.6C. You must provide the required information of Forms480.6B and 480.6C.

Line 21 – Enter the total of other payments and withholdingsnot included on the preceding lines. Group, as it corresponds,those reported in an Informative Return, those that are not

PART III - OTHER PAYMENTS AND WITHHOLDINGS

Line 1 - Enter the estimated tax paid for the taxable year.These payments must be broken down on Schedule TIndividual, Part II, line 9. For more information aboutestimated tax, refer to the INSTRUCTIONS (OBLIGATIONTO PAY ESTIMATED TAX).

Line 2 – Enter the amount of tax overpaid according to theprevious year return that you requested to credit to the estimatedtax for the current year. Amounts already included on line 1should not be included on this line.

Line 3 - In case you are filing an amended return, enter on thisline the amount paid to cover the tax determined in the originalreturn, that has been included with the return at the time of itsfiling or that was paid later.

Line 4 - Enter on lines 4(a), 4(b) and 4(c) the tax withheld, asreported in Boxes 6, 7 and 9, respectively, of the InformativeReturn – Payments to Nonresidents or for Services fromSources Outside of Puerto Rico (Form 480.6C). Provide therequired information of Form 480.6C. Enter on line 4(d) anyother withholding reported on Form 480.6C for which a specificline is not provided on this line 4.

Line 5 – Enter the tax withheld reported in Box 11 of theInformative Return - Individual Retirement Account (Form480.7). Provide the required information of Form 480.7.

Line 6 - Enter on lines 6(a), 6(b) and 6(c) the amount reportedon the Informative Return - Other Income Subject to Withholding(Form 480.6B), Boxes 5 and 6, Column of Amount Withheld;Informative Return - Individual Retirement Account (Form480.7), Box 7 or Informative Return - Educational ContributionAccount (Form 480.7B), Box 6. Provide the required informationof Form 480.6B, Form 480.7 or Form 480.7B, as applicable.

Line 7 - Enter the amount reported on Form 480.6B, Boxes 2and 8, Column of Amount Withheld. Provide the requiredinformation of Form 480.6B.

Line 8 – Enter the amount reported on Form 480.6B, Box 3,Column of Amount Withheld. Provide the required informationof Form 480.6B.

Line 9 – Enter the tax withheld reported in Box 3 of InformativeReturn - Services Rendered (Form 480.6SP). Provide therequired information of this form with the return. Enter in thespace provided, the amount of informative returns includedwith the return for this concept.

Line 10 – Enter the tax withheld reported in Box 1 of Form480.6B. Provide the required information of this form with thereturn.

Line 11 – Enter the tax withheld at source on your distributableshare in pass-through entities (corporations of individuals,partnerships and special partnerships), as reported in Part IIIof the Informative Return – Pass-Through Entity (Form 480.60EC).

Enter on line 11(a) the amount reported on lines 10,12 and 13,Part III of Form 480.60 EC; on line 11(b) the amount reportedon lines 8 and 9, Part III of Form 480.60 EC; on line 11(c) theamount reported on line 5, Part III of Form 480.60 EC; on line11(d) the amount reported on line 6, Part III of Form 480.60 EC;on line 11(e) the amount reported on line 7, Part III of Form480.60 EC; and on line 11(f) the amount reported in any otherline, Part III of Form 480.60 EC for which a specific line is notprovided on this line 11. Provide the required information of thisform with the return.

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reported in an Informative Return and the income tax withheldon Distributions for reason of a disaster declared by the Governorof Puerto Rico.

Provide on line 21(a) the required information of thecorresponding Informative Return (Ex. Form 480.6B). On theother hand, if line 21(b) includes payments and withholdingsfor different concepts, you must submit with your return aschedule showing the nature of each payment that was subjectto withholding and the withholding included on this line. Enteron line 21(c) the 10% tax withheld, as included on Schedule FIndividual, Part VI, line 6(c) (Forms 480.7 and 480.7C).

Keep for your records any informative return thatsupports the withholding claimed on this line.

PART IV – BREAKDOWN OF THE PURCHASE OF TAXCREDITS

Select the oval corresponding to the act (or acts) under whichyou acquired the tax credit. Enter in the space provided theamount of the tax credit available for the taxable year.

The limitation related to the credits that are subject to moratoriumwill be made on the total credits subject to moratorium that areincluded on line 9 of Part II of this Schedule, and not on eachcredit that is included in this part.

In order to claim any of the credits included in this part, thetaxpayer must include with his/her return a sworn statementnotifying to the Secretary the purchase or transfer of the credit.

In addition, you must submit evidence of the credits that you areclaiming, for example, the Administrative Determination issuedby the Department to the investor granting the credit and theschedule detailing the year in which the credit is available to beused, taxable years in which the credit has been claimed, itsexpiration date, the total amount of the credit and the amountsclaimed in previous years.

SCHEDULE C INDIVIDUAL - CREDIT FOR TAXESPAID TO FOREIGN COUNTRIES, THE UNITED STATES,ITS STATES, TERRITORIES AND POSSESSIONS

Use this Schedule to determine the credit by deductible proportionfrom taxes paid to foreign countries, the United States, its states,territories, and possessions. You must indicate if Schedule CIndividual is being used to compute the credit that will be claimedas part of: (1) Regular tax; (2) Alternate basic tax (Schedule OIndividual); or (3) Optional tax (Schedule X Individual).

Remember that from taxable year 2019 onwards, all return thatincludes a Schedule C Individual will be filed electronically. Allthe evidence that is required to be included with the return tosupport the payment of any tax paid that is being claimed ascredit in Part II of this Schedule must be filed through SURI.

To claim a credit for taxes paid to foreign countries, the UnitedStates, its states, territories and possessions, it is necessary thatyou:

1) Paid or accrued income tax in one or more of suchjurisdictions.

2) Included in your Puerto Rico income tax return the taxableincome from one or more of such jurisdictions.

3) Include with your return evidence of the tax paid (copy ofcancelled or substitute checks and copy of the return filed

to the IRS or any eligible jurisdiction). If the payment receiptor tax return is in a foreign language, you must submitwith your return a certified translation of it.

If you received income from sources in, or paid taxes to morethan one foreign country, state, territory or possession of theUnited States, you shall provide the information separately foreach foreign country, state, territory or possession in Parts Ithrough V of Schedule C Individual, indicating the type of form,the name of each country, state, territory or possession inColumns A, B and C. If you received income from sources in,or paid taxes to more than 3 jurisdictions as well as the UnitedStates, submit additional Schedules C Individual.

An individual resident of Puerto Rico that is required to file areturn and pay income taxes to the United States for incomeother than from sources within Puerto Rico or the United Stateswill include in the column labeled “United States” such incomefrom sources outside of Puerto Rico and the United States, asincome from sources of that jurisdiction, as well as the losses,expenses and deductions associated with it.

Include in the column labeled “Total” the total amount of items ofincome, and expenses, losses and deductions from sourcesoutside of Puerto Rico. For individuals residing in Puerto Ricowho are U.S. citizens or permanent resident aliens in the UnitedStates (United States Permanent Resident Card, USCIS FormI-551, also known as “green card”), the amount informed in theUnited States column will be the same as that reported in theTotal column.

PART I - DETERMINATION OF NET INCOME FROMSOURCES OUTSIDE OF PUERTO RICO

Line 1 - Enter the taxable gross income derived from sources ineach of the applicable jurisdictions, itemized by the type of incomelisted on lines (a) through (h), and totalize them on line 1(i).

Taxable Gross Income

For purposes of Part I of Schedule C Individual, the term “taxablegross income” means gross income of the taxpayer that issubject to income tax in Puerto Rico, so it will not include anyexempt items under Section 1031.02 of the Code. Include inthe appropriate column all items of taxable gross income earnedfrom sources within the pertinent jurisdiction, even if such item ofincome was not subject to tax in that jurisdiction. Remember thaton property sales, the gross income is determined by subtractingthe cost or adjusted basis of the property sold from the salesprice.

Sources of Income

As a general rule, the source of income is determined as follows:

(1) Interests and dividends - It is determined by the payer’sresidence or place of incorporation.

(2) Payments for personal services - It is determined by theplace where the services are rendered.

(3) Rents and royalties - It is determined by the place wherethe property is located or by the place of use, or of theprivilege of using patents, copyrights, trademarks, goodwilland other similar property.

(4) Profit on the sale of inventory - If the property sold wasacquired by purchase from unrelated individuals, it isdetermined based on where you transfer the title of thegoods; to determine the source of income from the sale of

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inventory produced by the seller, or acquired by purchasefrom related persons, see Sections 1035.04 and 1035.05of the Code.

(5) Profit on the sale of personal property that is not inventory-It is determined based on the residence of the seller; certainexceptions apply in the case of depreciable and intangibleproperty, as well as sales through offices or other placesof business outside of Puerto Rico.

(6) Profit on the sale of real property - It is determined by theplace where such property is located.

For additional information on how to determine the source ofincome, see Sections 1035.01 to 1035.07 of the Code.

Line 2 - Reduce the taxable gross income reflected on line 1(i)of each column by:

(1) Expenses directly related to the production of such income,

(2) The losses from sources of the relevant jurisdiction, and

(3) A proportion of other expenses or deductions not relatedto a category of income.

Include on line 2(c)(iii) the proportional part of any otherexpense, loss or other deduction that cannot be assigned orrelated to any item of the total income on line 1(i).

The expenses or deductions to be included on line 2(c)(iv)DO NOT include losses accrued from sources in Puerto Rico,nor expenses or deductions directly related to income fromsources in Puerto Rico or items excluded from income or exemptfrom income tax under the Code or special laws.

Include on line 2(c)(v) the taxpayer's taxable gross incomefrom all sources, including sources in Puerto Rico. Enter on thisline the result of the sum of the amounts included on lines 1B,1C, 2A, 2B, 2E, 2F, 2H, 2I, 2J, 2L, 2M, 2N and 2O of Part 1,page 2 of the return; PLUS: the amounts included in the (Total$ ____) row on lines 2C, 2D, 2G, 2K, 2P, 2Q, 2R, 2S and 2Tof Part 1, page 2 of the return; PLUS: the exempt incomeamount that results from subtracting lines 2D, 31B through 31F,and 37 through 42 from line 43, first Column, of Part II ofSchedules IE Individual that are included with the return.

Under the Optional Computation, the gross income shall bedetermined for the taxpayer or spouse, entering on this line50% (among taxpayer and spouse) of the result of the sum ofthe amounts included on lines 1, 2, 3A, 3B, 3E, 3F, 3H, 3I, 3J,3L, 3M, 3N and 3O, Part I of Schedule CO Individual; PLUS:the amounts included in the (Total $ ____) row of lines 3C, 3D,3G, 3K, 3P, 3Q, 3R, 3S and 3T, of Part I, Schedule CO Individual;PLUS: the exempt income amount that results from subtractinglines 2D, 31B through 31F, and 37 through 42 from line 43, firstColumn, of Part II of Schedules IE Individual that are includedwith the return.

PART II - TAXES PAID TO THE UNITED STATES, ITSSTATES, POSSESSIONS AND FOREIGN COUNTRIES

Indicate the date of payment, the total tax paid or accrued ineach jurisdiction and the type of form in which such tax isreported. This shall be the form that the taxpayer must submitthrough SURI as evidence of the credit that is claimed. If the taxwas paid or accrued in a foreign currency, you must convertsuch amount to U.S. dollars at the date of the payment. Youmust keep for your records a schedule indicating the currencyexchange to U.S. dollars.

In the case of taxes paid or accrued to the United States, it shallbe calculated after claiming the Foreign Tax Credit for taxespaid to foreign countries and states, territories or possessionsof the United States, including Puerto Rico, on income fromsources outside the United States included in the federal return.

PART III - REDUCTION IN CREDIT FOR TAX PAID ORACCRUED

Use this part to determine the adjustment to the total of tax paidor accrued to the foreign country, state, territory or possessionof the United States when the income from sources outside ofPuerto Rico includes taxable income in the foreign country butexempt for purposes of income tax in Puerto Rico.

Line 1 - Include on this line that portion of the net incomereported to the foreign country that was subject to income tax inthat country and that is part of the tax claimed in Part II but isNOT subject to income tax in Puerto Rico.

Line 2 - Include on this line the total net income reported andsubject to income tax in the foreign country for which the incometax reported in Part II of this Schedule was determined.

PART IV - DETERMINATION OF CREDITLine 2 - Include on this line the net income subject to taxdetermined on line 13, Part 2 of the return. If you have incomesubject to preferential rates, enter the amount that results fromadding Columns A to H, line 11 of Schedule A2 Individual.

Under the Optional Computation, enter the amount determinedon line 11, Part II, Column B or C of the Schedule CO Individual,as applicable.

Line 4 - Enter the amount of line 17, Part 3, page 2 of the return;Part III line 4, Column B or C, as applicable, of Schedule COIndividual, or Part II, line 4 of Schedule X Individual.

Determine the credit to be claimed and enter the amount thatyou are entitled.

The credit cannot exceed the amount of taxes paid oraccrued to foreign countries, the United States, itsstates, territories and possessions.

Transfer the total credit determined on line 6(c) to Part 3, line 18of the return or Part III, line 5, Column B or C of Schedule COIndividual; or Part II, line 5 of Schedule X Individual, asapplicable.

Alternate Basic TaxIf you are subject to the alternate basic tax, you need to calculatethe amount determined on this Schedule using such tax and thenet income subject to alternate basic tax. In Part I, include theincome from sources outside of Puerto Rico that were consideredto determine the net income subject to alternate basic tax. Also,you need to make the following adjustments:

• Part I, lines 1(a) through 1(i) of Schedule C Individual - replaceby the corresponding items of the taxpayer's gross income thatis subject to alternate basic tax; include in the correspondingcolumn all items of gross income subject to alternate basic taxfrom sources in the relevant jurisdiction, even if such incomeitem was not subject to tax in that jurisdiction.

• Part I, line 2(c)(v) of Schedule C Individual - replace by thetaxpayer's total gross income that is subject to alternatebasic tax.

Shall be determined the gross income subject to tax from allsources, including from sources in Puerto Rico. Enter onthis line the result of the sum of the amounts included on

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lines 1B, 1C, 2A, 2B, 2E, 2F, 2H, 2I, 2J, 2L, 2M, 2N and2O of Part 1 from page 2 of the return; PLUS: the amountsincluded in the (Total $ ____) row of lines 2C, 2D, 2G, 2K,2P, 2Q, 2R, 2S and 2T from Part 1, page 2 of the return;PLUS: the exempt income item that results from subtractinglines 2D, 31B through 31F, and 37 through 42 from the line43, second Column, of Part II of Schedules IE Individualthat are included with the return.

Under the Optional Computation, the gross income shall bedetermined for the taxpayer or spouse, writing on this line50% (among taxpayer and spouse) of the result of the sumof the amounts included on lines 1, 2, 3A, 3B, 3E, 3F, 3H, 3I,3J, 3L, 3M, 3N and 3O of Part I of Schedule CO Individual;PLUS: the amounts included in the (Total $ ____) row oflines 3C, 3D, 3G, 3K, 3P, 3Q, 3R, 3S and 3T of Part I,Schedule CO Individual; PLUS: the exempt income item thatresults from subtracting lines 2D, 31B through 31F, and 37through 42 from the line 43, second Column, of Part II ofSchedules IE Individual that are included with the return.

• Part IV, line 2 of Schedule C Individual - replace by line 18of Part I of Schedule O Individual.

• Part IV, line 4 of Schedule C Individual - replace by line4 of Part II of Schedule O Individual.

Determine the amount of the credit in Part IV of Schedule CIndividual recalculated with the previous adjustments, enter thesame on line 5, Part II of Schedule O Individual and select theoval at the top identifying that Schedule C Individual wasrecomputed for purposes of the alternate basic tax. Include withyour return both Schedules C Individual, calculated for theregular tax and recalculated for the alternate basic tax.

Taxpayers that choose the Optional Computation of Tax

Married taxpayers who choose the Optional Computation ofTax (Schedule CO Individual) in which either or both havepaid or accrued income tax in one or more jurisdictions outsideof Puerto Rico and has been included on the Puerto Ricoreturn as taxable income from that jurisdiction, will determinethe Credit for Taxes Paid to Foreign Countries, the UnitedStates, its States, Territories and Possessions individually. Eachspouse will complete a Schedule C Individual identifying it at thetop, as applicable. Enter the amount determined on ScheduleCO Individual, Part III, line 5, Column B or C, as applicable.Include with your return both Schedules C Individual, for thetaxpayer and spouse.

Also, if either or both spouses are subject to the alternate basictax, it will be necessary to recalculate the Credit for Taxes Paidto Foreign Countries, the United States, its States, Territoriesand Possessions individually as indicated above in theinstructions related to the alternate basic tax. Identify eachSchedule C Individual for the taxpayer and spouse, asapplicable, and select the oval at the top that identifies that theSchedule was recalculated for purposes of the alternate basictax. Include with your return both Schedules C Individual, theone calculated for regular tax and the one recalculated foralternate basic tax for each one of the spouses, as applicable.

Under the Optional Computation, the gross income shall bedetermined on line 2(c)(v) for the taxpayer or spouse, writingon this line 50% (among taxpayer and spouse) of the result ofthe sum of the amounts included on lines 1, 2, 3A, 3B, 3E, 3F,3H, 3I, 3J, 3L, 3M, 3N and 3O Part I, Schedule CO Individual;PLUS: the amounts included in the (Total $ ____) row of lines3C, 3D, 3G, 3K, 3P, 3Q, 3R, 3S and 3T, Part I of Schedule COIndividual; PLUS: the exempt income item that results fromsubtracting lines 2D, 31B through 31F, and 37 through 42 fromline 43, second Column, of Part II of Schedules IE Individualthat are included with the return.

PART V - DETERMINATION OF CREDIT ATTRIBUTABLETO LONG-TERM CAPITAL GAIN OF RESIDENTINDIVIDUAL INVESTORS

Those taxpayers who have indicated in question E from theQuestionnaire on page 1 of the return that are residentindividuals investors and have determined a taxable gain inColumn E, Part III of Schedule F1 Individual related to theperiod prior to establishing residence in Puerto Rico, may claima credit for tax paid to foreign countries for such gains.

Line 1(a) - Include on this line the total gain determined inColumn E, Part III of Schedule F1 Individual.

Line 2 - Include the amount of tax paid to the foreign countryattributable to capital gains included on line 1(a). You mustindicate the type of form in which the tax is reported. This will bethe form that the taxpayer will submit through SURI as evidenceof the credit to be claimed.

The amount determined on line 4 of this Part V is will be addedto any credit determined on line 6(c), Part IV of this Schedule CIndividual and will be transferred to Part 3, line 18 of the returnor to Part III, line 5 of Schedule CO Individual.

SCHEDULE CH INDIVIDUAL - TRANSFER OF CLAIMFOR EXEMPTION FOR CHILD (CHILDREN) OFDIVORCED OR SEPARATED PARENTS

In the case of minor children from divorced or separatedparents, the exemption for dependents will be claimed by theparent with the right to the custody or will be divided in halfbetween the parents that have joint custody. In the case of jointcustody, you should select the oval provided for this purpose.

However, a minor child will be considered to have received morethan half of his/her support during a calendar year from the parentwho does not have the right to custody or shared custody if:

1) the parent with the right to custody or with joint custodysigns a Schedule CH Individual establishing that he/shewill not claim said child as a dependent for any taxableyear commencing within said calendar year; and

2) the parent who does not have the right to custody or hasjoint custody, keeps said Schedule for his/her records forthe taxable year commencing within said calendar year.

You may agree to release your claim to the child’s exemption,including those with joint custody, for the current taxable year ifyou complete and sign this Schedule and provide it to theparent that will claim the exemption for such dependents. Theparent that does not have the right to custody or thatonly has joint custody must keep this Schedule for his/her records for the taxable year in which the exemptionwas released, so that he/she may claim the totalexemption.

SCHEDULE CO INDIVIDUAL - OPTIONALCOMPUTATION OF TAX

You must complete this Schedule and include it with your returnif you choose the optional computation of tax in the case ofmarried individuals living together and filing a joint return. Thiscomputation allows each spouse to determine the tax individually.

If you choose this computation, do not complete Part 1 and 2,or lines 14 through 21 of Part 3 located on page 2 of thereturn.

If the taxpayer or spouse choose the optional tax providedunder Section 1021.06 of the Code for individuals who areengaged in self-employed trade or business, fill in the

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corresponding oval in Part I, Columns B and C of this schedule.In this case, the spouse who chooses to pay this tax will reporthis or her income on lines 1, 2, 3A through 3T of Part I, asapplicable, will not complete Part III of the corresponding columnof Schedule CO Individual, and will complete Schedule XIndividual to determine the tax liability . Once the optional tax isdetermined on Schedule X Individual, the spouse who madethe election will transfer the amount determined to Part 3, line 23of the return. On the other hand, the spouse who did not makethe election will complete the rest of the Schedule CO Individualto determine the tax individually.

The following instructions detail how the income, deductions,personal exemption, exemption for dependents and additionalpersonal exemption for veterans will be attributed to eachspouse.

PART I - DETERMINATION OF INDIVIDUALLY ADJUSTEDGROSS INCOME

Line 1 - Wages, Commissions, Allowances and Tips

This type of income will be attributed as it was earned by eachspouse individually.

Total withholding statements with this schedule: Enterin the first block the amount of every Withholding Statements(Form 499R-2/W-2PR) received during the taxable year whoseinformation is included with the return (Do NOT includewithholding statements with salaries paid under a qualifiedphysician decree under Act 14-2017, as amended).

In Column A, enter the total of income tax withheld by each oneof the employers for both the taxpayer and the spouse. If thereis no tax withheld, enter zero.

Enter in Column B, the wages attributable to the taxpayer andin Column C the wages attributable to the spouse.

Total withholding statements with this schedule undera qualified physician decree: If you or your spouse receivesalaries as a qualified physician who have a decree in forceunder the Incentives for the Retention and Return of MedicalProfessionals Act (Act 14-2017, as amended) be sure that youremployer has checked in Form 499R-2/W-2PR that thecompensation includes payments for this concept.

Enter in the first block the amount of withholding statementswhose information is included with the return, followed by theincome tax withheld in Column A and salaries paid in ColumnsB and C, as it corresponds, to the taxpayer and spouse.

Add the amounts on Columns A, B and C and enter the totalamount of income tax withheld, wages, commissions, allowancesand tips at the bottom of each column.

For additional information, see instructions of Part 1, line 1 of thereturn.

Make sure to include with your return the informationrequired of all the Withholding Statements (Form 499R-2/W-2PR).

Line 2 - Wages Reported in a Federal W-2 Form

This type of income will be attributed as earned by each spouseindividually.

Enter in Columns B and C, as it corresponds to the taxpayerand his/her spouse, the total Federal Government income from

salaries and wages received, excluding the Cost of LivingAllowance (COLA). To determine if you qualify for this exclusion,refer to RELEVANT FACTS – FEDERAL EMPLOYEES.

You can also refer to the Informative Booklet to Provide Guidanceon the Income Tax Responsibilities of Federal, Military andOther Employees.

Enter the amount received from COLA on line 11, Part II ofSchedule IE Individual.

Total W-2 with this schedule: Enter in the first block theamount of Federal Withholding Statements (W-2 Forms)received by the taxpayer and spouse during the taxable yearwhose information is included with the return (Do NOT includeW-2 Forms with salaries paid under a qualified physiciandecree under Act 14-2017, as amended).

Enter in the box identified as Exempt Wages under Sec.1031.02(a)(36) of the Code the amount received from FederalGovernment salaries, up to a maximum of $40,000, if you area young individual whose age fluctuates between 16 and 26years at the end of the taxable year.

In the case that the taxpayer and spouse qualify for this exemption,each one may exclude up to a maximum of $40,000 from salariespaid by the Federal Government. The exempt income determinedfor each one of the spouses under Section 1031.02(a)(36) ofthe Code, must be added and included in the provided box.Transfer the exempt amount to line 31A, Part II of Schedule IEIndividual of each spouse.

In Column A, enter the total income tax withheld for Puerto Ricoreported on the W-2 Form. If there is no tax withheld, enter zero.

In Columns B and C, enter all wages from the FederalGovernment taxable in Puerto Rico, received by the taxpayerand spouse, as applicable.

Total W-2 with this schedule under a qualified physiciandecree: If you receive salaries as a qualified physician whohave a grant in force under the Incentives for the Retention andReturn of Medical Professionals Act (Act 14-2017, as amended),enter in the first block the amount of W-2 Forms and in thesecond block the Exempt Wages under Section 1031.02(a)(36)of the Code, follow by the income tax withheld for Puerto Ricoin Column A and salaries paid in Columns B and C, asapplicable.

Make sure to include with your return the requiredinformation of all the W-2 Forms. You must keep foryour records copy of the form in case it is eventuallyrequested by the Department.

Line 3 - Other Income (or Losses)

Enter on lines 3A through 3T the total of each type of otherincome or deductible losses, distributing in Columns B and Cthe amounts, as they correspond to the taxpayer and his/herspouse. These amounts will be attributed individually or on a50% basis to each spouse, as indicated below.

The following income will be attributed to each spouseas they were earned individually: distributable share onprofits from partnerships, special partnerships and corporationsof individuals (pass-through entities), distributions fromgovernmental plans, distributions from Individual RetirementAccounts and Educational Contribution Accounts, income fromannuities and pensions, alimony received, gain or loss from

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industry or business, farming, professions and commissions,lump-sum distributions from qualified plans and income fromsalaries, wages, compensation or public shows received by anonresident individual.

The following concepts of miscellaneous income will be attributedalso as they correspond to each spouse individually: incomefrom discharge of debts and for the use of intangibles, judicial orextrajudicial indemnification, income from sport teams ofinternational associations or federations, distributions fromdeferred compensation plans, distributions from qualifiedretirement plans (partial or lump-sum not due to separationfrom service), and Distributions due to a disaster declared bythe Governor of Puerto Rico.

On the other hand, the income from interests, dividends fromcorporations, income from prizes and contests, miscellaneousincome (except those indicated in the preceding paragraph),dividends from Capital Investment or Tourism Fund, gain orloss from rental business, gain or loss from sale or exchange ofcapital assets, and net long-term capital gain on InvestmentFunds, will be attributed to each spouse on a 50% basisof the total amount.

It is very important that you provide the detailed information foreach concept of other income or losses on the correspondingSchedules.

For additional information, including the tax treatment of losses,see instructions of Part 1 of the return.

Line 5 - Alimony Paid

Generally, you may claim as a deduction any periodic paymentmade for alimony under a divorce or separation decree, aslong as you comply with certain requirements. You mustprovide the social security number of the person whoreceives the payment and the judgment number. Youmust keep for your records copy of cancelled orsubstitute checks and the divorce decree. Lump-sumpayments or assets division, voluntary payments notincluded in a court decree or agreement for separationsupport, or child support payments, are not deductible.

For information regarding the requirements that the alimonypayment must comply with, refer to instructions of Part 1, line 4of the return.

PART II - DETERMINATION OF NET TAXABLE INCOME

Line 1 – Deductions Allocated in Half (50%) of the Total

For taxpayers that choose the optional computation of tax, thefollowing deductions will be attributed 50% to each spouse:mortgage interests, casualty loss on your principal residence ,medical expenses, charitable contributions, and loss of personalproperty due to certain fortuitous causes. Therefore, once thetotal of this deductions is determined in Part I, line 6 of ScheduleA Individual, enter 50% of said amount in Columns B and C ofthis line 1.

For detailed information of the deductions to be claimed on thisline refer to the instructions of Schedule A Individual, Part I, lines1 through 5.

Remember not to submit evidence of the deductionswith the return. However, you must keep the evidenceof these deductions for your records for at least 6 years,in case that they are requested by the Department.

Nevertheless, if you claim a deduction for mortgage interestson the principal residence informed on Form 1098, you mustinclude the required information of said form with your return.Also, on line 1(e) of Schedule A Individual you must select theoval 2 corresponding to Form 1098 and other. In case oftaxpayers that comply with the requirements established onSection 1033.15(a)(1)(F) of the Code, must select the oval 1 ofline 1(e) and include the requested information.

Line 2 – Deductions Individually Allocated

For taxpayers that choose the optional computation of tax, thefollowing deductions will be claimed individually by the spouseto whom they correspond: contributions to individual retirementaccounts, educational contribution accounts and my futureaccounts as well as interest paid on student loans at universitylevel, up to the limits and subject to the provisions of the Code.Therefore, enter in Columns B and C the amount determined inPart I, line 10, Columns A and B of Schedule A Individual, asapplicable to the taxpayer and to the spouse.

For detailed information of the deductions to be claimed on thisline, refer to the instructions of Schedule A Individual, Part I,lines 7 through 9.

Remember not to submit evidence of the deductionswith the return. However, you must keep the evidenceof these deductions for your records for at least 6 years,in case that they are eventually requested by the Department.

Line 5 – Personal Exemption

The pre-printed amount of $3,500 in Columns B and Ccorresponds to the personal exemption that each spouse mayclaim under the optional computation of tax.

Line 6 - Exemption for Dependents

Enter in the spaces provided on lines 6A and 6B, the number ofdependents claimed according to their category. Enter on line6A the dependents for whom the exemption is claimed completely($2,500 per dependent), and on line 6B those for whom onlyhalf of the exemption is claimed under the special rule of parentswith joint custody ($1,250 per dependent).

Multiply the amount of dependents claimed on each line by$2,500 or $1,250, as applicable. Add lines 6A and 6B andindicate the total on line 6C. Enter in each of Columns B and Cof line 6D 50% of line 6C. It is necessary that you detail theinformation of the dependents that you claim on Schedule A1Individual. For additional information, see instructions ofSchedule A1 Individual.

Line 7 – Additional Personal Exemption for Veterans

Enter in Columns B and C, as applicable to the taxpayer or thespouse, the amount of $1,500, if you are a veteran of the UnitedStates Armed Forces.

If both spouses are veterans, each may claim $1,500.

Keep for your records copy of Form DD-214 (Dischargefrom U.S. Armed Forces).

Line 10 – Allowable deduction for Private Equityinvestment

In the case of individuals that, pursuant to Act 185-2014, asamended, or Act 60-2019 are considered as accreditedinvestors, they may claim a deduction for their initial investmentin a private equity fund (PEF) or in a Puerto Rico private equity

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fund (PEF-PR). For detailed information regarding thisdeduction, refer to the instructions of Part 2, line 12 of the return.Complete the following worksheet and submit it with your return:

Determination of the Deduction:

1. Amount of capital committed as initialinvestment that qualifies as contributed duringthe taxable year (From the Certificationissued by the PEF or PEF-PR) …............….

2. Applicable percentage:

• If the investment was in a PEF, enter 30%

• If the investment was in a PEF-PR ,enter60% ........................................................

3. Amount of deduction for initial investmentcontributed during the year (Multiply line 1 bythe applicable percentage on line 2) ...................

4. Amount of the deduction not claimed inprevious years…...............................………

5. Total deduction for investment in a PEF orPEF-PR (Add lines 3 and 4) .........................

Deduction Limitation:

6. Net income (Subtract line 8, Part II, from line 6,Part I of Schedule CO Individual, Column B orC, as it corresponds. If line 8, Part II is morethan line 6, Part I, enter zero) ........................

7. Applicable percentage:

• If the investment was in a PEF, enter 15%• If the investment was in an PEF-PR, enter

30% .........................................................

8. Maximum amount allowable as deduction(Multiply line 6 by the applicable percentageon line 7) .......................................................

9. Allowable deduction on this return (Enter thesmaller between lines 5 and 8. Transfer thisamount to line 10, Part II of Schedule COIndividual, Column B or C, as it corresponds)

PART III - DETERMINATION OF TAXLine 1 - Tax

Generally, both spouses should determine their tax using thesame method and selecting the corresponding oval. However,if the taxpayer or spouse indicated on line 1, Part I of thisschedule that choose the optional tax provided under Section1021.06 of the Code for individuals who are engaged in self-employed trade or business, he/she will determine the taxliability in Schedule X Individual. The spouse, who did notmake the choice, will determine his/her tax in this schedule.

Tax Tables

Use the Table for the Tax Computation provided on page 19 ofthe instructions. Determine your tax individually consideringyour Net Taxable Income, as determined in Part II, on line 11,Columns B and C, respectively. Enter the tax determined foreach column on this line and select Oval 1.

Preferential Rates

If you are a resident of Puerto Rico and derived income subject topreferential rates such as interests, dividends or long-term capitalgains, among others, you must complete Schedule A2 Individual.On this Schedule you will determine the tax on income that issubject to a preferential rate and the regular tax on any otherincome and you can compare them with the regular tax on totalincome so you can choose the most beneficial alternative.

Also, if your income subject to preferential rates is $20,000 ormore, it is required that you pro-rate the total allowabledeductions included in Part II, line 3 (or line 4 in the case ofnonresidents or part-year residents) according to the differenttypes of income.

If you used Schedule A2 Individual, transfer the tax amountfrom line 17 of this schedule to Columns B and C, as applicable,of this line and select Oval 2. Complete a Schedule A2Individual for each spouse, properly identified on thetop part, and include both Schedules with your return.

Nonresident alien

If you are a nonresident alien not engaged in trade or businessin Puerto Rico, all of your income from sources within PuertoRico are subject to a fixed tax rate of 29%, except in the caseof dividends, which are taxed at 15%, and the incomeattributable to the distributable share of a shareholder in acorporation of individuals which is taxed at 33%. Enter the taxdetermined in Columns B and C, as it corresponds, of this lineand select Oval 3.

If you are a nonresident alien engaged in trade or business inPuerto Rico, all of your income from sources within Puerto Ricoas well as the income which is effectively connected with theoperation of a trade or business in Puerto Rico, is subject tonormal tax rates.

Form AS 2668.1 (Back Pay)

If you determined your tax using Form AS 2668.1 (Back Pay),according to the provisions of Section 1032.09(d) of the Code,enter the tax determined in Columns B and C, as it corresponds,of this line and select the Oval 4. You must complete and submitwith the return a Form AS 2668.1 for each spouse, as applicable.

For detailed information regarding this computation, refer toinstructions of line 14, Part 3 of the return.

Line 2 - Gradual Adjustment Amount

If the net taxable income of either or both spouses is more than$500,000, determined on an individual basis, you must completeSchedule P Individual. Individually determine the gradualadjustment amount on said Schedule (See Instructions ScheduleP Individual). Enter in Columns B and C, as applicable, theamount determined on Schedule P Individual, line 7. Submitwith the return the Schedules used.

Line 4 - Regular Tax Before the Credit

Section 1021.01 (c) of the Code provides that the tax determinedshall be 95% of the sum of the regular tax and the amount ofgradual adjustment. However, for individuals with a gross incomethat does not exceed $100,000, the tax determined will be92% of the sum of the regular tax and the amount of gradual

$ _________

%

$ _________

$ _________

$ _________

$ _________

%

$ _________

$ _________

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adjustment. Therefore, the amount to be entered on this linewill depend on the method used to determine the tax on line 1and the amount of the taxpayer's gross income, as indicatedbelow:

• If you selected Oval 1 (According to Table):

x If the sum of lines 1, 2, 3A, 3B, 3E, 3F, 3H, 3I, 3J, 3L,3M, 3N and 3O and the row for total (Total $ ________)included on lines 3C, 3D, 3G, 3K and 3P through 3T,Part I of Schedule CO Individual, plus the exemptincome from line 43 less lines 2D, 31B to 31F, and 37through 42, first column, Part II of Schedule IE Individual,does not exceed $100,000 - Multiply line 3 by .92.

x If the result of the previous sum is greater than $100,000- Multiply line 3 by .95

• If you selected Oval 2 (Preferential rates - Schedule A2Individual)- Enter the amount from line 3, Part III of thisSchedule CO Individual. Do not multiply this amount byany of the percentages (92% or 95%) included on thisline. (See instructions for line 17, Schedule A2 Individual).

• If you selected Oval 3 (Non-resident Alien) or Oval 4 (ModelSC 2668) - Enter the amount from line 18.

Line 5 - Credit for taxes paid to foreign countries, theUnited States, its states, territories and possessions

When either spouse or both have paid or accrued income taxin one or more jurisdictions outside of Puerto Rico and taxableincome from that jurisdiction has been included in the PuertoRico return, you will determine the Credit for Taxes Paid toForeign Countries, the United States, its States, Territories andPossessions individually. Each spouse will complete a ScheduleC Individual with the income, deductions and taxes that applyindividually. Make sure to properly identify each Schedule onthe top, according to the spouse to whom it belongs. If bothtaxpayers determined credit, submit both Schedules.

If either spouse is subject to the alternate basic tax (line 7), youmust recalculate the Credit for Taxes Paid to Foreign Countries,the United States, its States, Territories and Possessions andalso submit the recomputed Schedule C Individual, asapplicable.

For more information on calculating the credit, seeinstructions of Schedule C Individual.

Line 7 - Excess of Net Alternate Basic Tax over NetRegular Tax

You should complete Schedule O Individual – Alternate BasicTax if either or both spouses have net income subject toalternate basic tax of $25,000 or more.

Enter in Columns B and C, as it corresponds, the amountdetermined on Schedule O Individual, Part II, line 7 for eachspouse, as applicable.

Line 8 - Credit for alternate basic tax

You must complete Parts III and IV of Schedule O Individual.Enter in Columns B and C, as it corresponds, the amountdetermined on line 4, Part III of Schedule O Individual.

For additional information to determine this credit, seeinstructions of Schedule O Individual.

Line 10 - Total Tax Determined

Enter the sum of Columns B and C of line 9. Transfer thisamount to Part 3, line 22 of the return.

PART IV - COMPUTATION OF THE ALLOWABLE AMOUNTSOF DEDUCTIONS TO NONRESIDENTS OR PART-YEARRESIDENTS

In this part the allowable amount of deductions will be determinedfor those individuals who have indicated in question B of theQuestionnaire on page 1 of the return, that for the taxable yearthey are considered nonresidents or a part-year residents ofPuerto Rico.

Follow the guides provided on each line.

SCHEDULE D INDIVIDUAL - CAPITAL ASSETS GAINSAND LOSSES, TOTAL DISTRIBUTIONS FROMQUALIFIED PENSION PLANS AND ANNUITYCONTRACTS

Use this Schedule to determine capital gains or losses on the saleor exchange of capital assets and to report total distributions fromqualified pension plans and variable annuity contracts. Capital assetscould be defined as a property acquired for investment.

Shall be included in this Schedule payments for judicial or extrajudicialcompensation received as a transactional agreement, replacing aloss realized on the sale of a capital asset that were reported inForm 480.6B. Provide the required information from Box 1 of theForm 480.6B. Enter the tax withheld on Schedule B Individual, PartIII, line 10.

The taxpayer may include on this Schedule total distributions froma fixed annuity that has been acquired as a capital asset. Thisamount will be included in Part I or II of this Schedule depending onthe period that the investment was in the hands of the taxpayer.

Capital gains or losses are classified in two classes, based onthe period of time you held the property:

1) short-term - property held for not more than one year.

2) long-term - property held for more than one year.

In order to determine short or long-term capital gains or losses,you must provide the description and location of the propertysold, indicate if the adjusted basis was increased by theprepayment of the tax and complete the information of Columns(A) through (F) of Parts I and III, and Columns (A) through (G)of Part II.

Once you determine a gain in the sale or exchange of capitalassets, you must identify the date of purchase and sale of theproperty. In the case of sale or exchange of long-term capitalassets, the property must be presented, as applicable, in PartsII and III, according to the applicable preferential tax rate.

In case that the eligible person to claim the preferential rate of15% or any other rate, has derived capital gains from bothcategories and at the same time has capital losses, to determinethe net capital gain under each category, said losses will beapplied against the gains in the proportion that each one ofthese gains bears with the total amount of said gains.

As a general rule, the adjusted basis of the property is itsoriginal cost plus the cost of the permanent improvements, lessdepreciation, if the property was leased during its possession.

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Provisions applicable to the adjusted basis of certaincapital assets:

The adjusted basis must include the increase in accumulatedvalue of capital assets on which prepayment was made for thespecial tax of:

• 5% during the period between July 1 and December31, 2006, as provided in Section 1014A of the PuertoRico Internal Revenue Code of 1994, as amended (1994Code), and of

• 8% during the period between July 1, 2014 and April30, 2015, as provided in Section 1023.21 of the PuertoRico Internal Revenue Code of 2011, as amended (2011Code).

You must also include in the adjusted basis the accumulatedgain upon which you paid the 5% special tax during the periodof July 1 to December 31, 2006 in the case of corporate stocksor partnership interests acquired upon the exercise of an option,as provided in Section 1046(e) of the 1994 Code.

Those taxpayers who benefited from the 5% or 8% special taxrate, must indicate it by selecting the oval in Parts II through IVof this Schedule. You must keep for your records Form SC2731 with the corresponding Schedule.

Any amount or increase in value of the included capital assetsgenerated after the election provided in Section 1014A of the1994 Code, or Section 1023.21 of the 2011 Code, must betaxed according to the law provisions in force at the moment inwhich the sale, exchange or other disposal of such capitalassets finally takes place.

Sale expenses include sales commissions, advertisements,legal fees, appraisal and other similar expenses. They do notinclude lodging expenses (i.e. hotels) nor travel expenses (i.e.airplane tickets).

Recognition of loss:

Losses generated in the sale of capital assets for whichthe 5% or 8% special tax was prepaid, shall be adjustedaccording to the effective income tax rate applicable tothis kind of transaction at the moment of the sale ofsuch assets, before the use or carryover of said loss bythe individual. According to the above, such loss willbe adjusted by a formula or fraction, where the numeratorwill be the 5% or 8% rate, as applicable, and thedenominator will be the effective income tax rate at thedate on which the sale of the asset took place.

For additional details, refer to Regulation No. 7188 of August 4,2006 and Section 1023.21(e) of the Code. Also, you can obtainmore information in Administrative Determination No. 14-16and Form SC 2731.

Provisions applicable under Act 132-2010, as amended(Act 132), better known as the Real Property MarketStimulus Act and Act 216-2011, as amended (Act 216),better known as the Housing Promotion ProgramTransition Act:

Sale of Qualified Property

Act 216 provides, among others, a tax benefit for the use of thegenerated loss on the sale of qualified property.

The limit of capital losses allowed against ordinary income for aparticular taxable year, if they were realized between

September 1, 2010 and December 31, 2020, will be $1,000.Such loss may be carried over up to a maximum of 15 years.If you realized a loss on the sale of qualified property, breakdownin Part VI of this schedule the detail of the origination date ofsuch losses, the amounts and the years in which they wereclaimed, and the balance to be claimed in future years.

For purposes of Act 132 and Act 216, “qualified property”means:

a) every existing residential real property located in PuertoRico suitable for family living, not occupied or occupied forresidential purposes, that is not a New ConstructionProperty, or

b) every existing nonresidential real property located in PuertoRico that is sold between January 1 and June 30, 2013and which sale price does not exceed $3,000,000.

The benefits provided by Act 132 and Act 216 will only beavailable to the first seller and corresponding first buyer of eachnew construction property or qualified property, and will notapply to any acquirer in a subsequent transfer, even if it tookplace before June 30, 2013. Also, the benefits will not apply ifthe transferor of the property is considered a related person ofthe transferee of such property.

Sale of New Construction Property or Qualified Propertyacquired between September 1, 2010 and June 30, 2013

(a) Exemption of net long-term capital gain

The net long-term capital gain generated from the sale of newconstruction property that has been acquired betweenSeptember 1, 2010 and June 30, 2013, will be fully exemptfrom income tax.

For purposes of Act 132 and Act 216, “new constructionproperty” means:

1. every residential real property of new construction locatedin Puerto Rico, suitable for family living that has not beensubject to occupation and that is acquired from a Developer.

For real property to be considered as New ConstructionProperty, the seller of the real property shall certify in writingto the purchaser, by affidavit, on or before the date ofacquisition, that the real property is of new construction andhas not been previously occupied, or

2. every house model consisting of a ground level, of twolevels or an elevated level that is pre-designed or pre-fabricated in reinforced concrete purchased from a bonafide pre-design or pre-fabrication company and which planshave been approved by the Regulations and PermitsAdministration (ARPE) on or before December 30, 2009,except by means of a waiver from Secretary of theDepartment of Consumer Affairs.

For the pre-designed or pre-fabricated home to beconsidered of New Construction Property, the acquirer mustsubmit a copy of the sales contract executed between thepurchaser and the pre-design or pre-fabrication companyand that it starts building with the appropriate ConstructionPermit issued by the Office of Permits Management (OGPE)between September 1, 2010 and June 30, 2013 and whichconstruction is completed on or before March 31, 2013 withproper filing of the Application of Use Permit at the OGPE.

The net long-term capital gain generated from the sale ofqualified property acquired between September 1, 2010

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and June 30, 2013, will be 50% exempt from the payment ofincome tax.

You must keep for your records copy of the Certification issuedby the Department in the year of the sale, for a minimum periodof 6 years, in the event that it will be required later by theDepartment.

Sale of Eligible Housing

(a) Net long-term capital gain exemption

The net long-term capital gain generated on the sale of aneligible housing that is acquired by the seller or by a QualifiedInstitutional Investor between July 1, 2013 and December 31,2020, will be totally exempt from the payment of alternate basictax. This exemption will also apply to a purchaser who acquiresan eligible housing from a qualified institutional investor, as longas it is the first sale the investor makes after the initial acquisition.

For purposes of Act 132 and Act 216, the following terms aredefined as follows:

a) Eligible Housing - a new construction property, as definedpreviously.

b) Qualified Institutional Investor – every individual orjuridical person resident of Puerto Rico, or every individualor juridical person not resident of Puerto Rico, that isengaged in the construction business, that invests in oneact or various separate acts, exclusively in units of EligibleHousing, a minimum of $1,000,000 or acquires no lessthan 5 units of eligible housing.

c) Developer - every natural or legal person, with the properdeveloper license, issued by the Department of ConsumerAffairs, which is engaged in the construction business as anemployer or principal responsible for the promotion, design,sales, construction of infrastructure works and housingprojects, either single or multi-story type. For purposes ofthis Act, the term “Developer” shall also include thosefinancial institutions or any natural or legal persons that byvirtue of a judicial or extrajudicial proceeding, or byagreement of payment or similar transaction, becomes thesuccessor in interest of a Developer.

For the provisions related to the principal residence, refer tothe instructions of Schedule D1 Individual.

For additional information, refer to Act 132, as amended,Act 216, as amended, Regulation No. 7923 of September7, 2010, Regulation No. 8127 of December 23, 2011 andExecutive Order 2012-27 of June 8, 2012.

PART I - SHORT-TERM CAPITAL ASSETS GAINS ANDLOSSES (HELD ONE YEAR OR LESS)

You must inform in this part every short-term capital gains andlosses.

Line 1 - Add Column (F) and enter the result on this line.

Line 2 – Enter the net short-term capital gain on the sale of yourprincipal residence or sole proprietorship business, determinedin Schedules D1, D3 and G Individual, as applicable. Foradditional information, refer to the instructions of said schedules.

Line 3 – Enter the distributable share on the net short-termcapital gain from a revocable trust or grantor trust, determinedon Form 480.60 F. You must keep for your records such form.

Also enter, the net short-term capital gain derived from an estateor trust in which the legatees, heirs or beneficiaries have chosento pay the tax on said gain in their individual character.

Line 4 – If you elected to pay tax using the bracket method forthe distributable share on net short-term capital gain (or loss)from a partnership, special partnership or corporation ofindividuals (pass-through entities), enter the amount determinedon Form 480.60 EC. Provide the required information of suchform with your return.

Line 5 – Enter the net short - term capital gain (or loss) ininvestment funds or attributable to direct investment and notthrough a Capital Investment Fund. Also enter the amountdetermined on the Informative Return - Employess-OwnedSpecial Corporation (Form 480.6 CPT). You must provide theinformation required of such form with your return.

Line 6 – Use this line only if during the taxable year youdisposed all the interest or assets used in an activity that is notyour principal industry or business and a capital gain wasderived in such disposal.

If you comply with the preceding requirement, enter the excessof deductions (losses) determined, as applicable, in whicheverof the following schedules: Schedule J Individual, Part IV, line5; Schedule K Individual, Part IV, line 5; Schedule L Individual,Part IV, line 5; Schedule M Individual, Part IV, line 5; or ScheduleN Individual, Part IV, line 5.

For additional information about losses incurred in activities thatdoes not constitute your principal industry or business, referto the instructions for LOSSES in Part 1 of the return.

PART II – LONG-TERM CAPITAL ASSETS GAINS ANDLOSSES (HELD MORE THAN ONE YEAR)

You must inform in this part the long-term capital gains andlosses generated on the sale or exchange of capital assetsheld for more than 1 year. In these cases, the taxpayer canelect to pay taxes on the capital gain at a preferential rate of15%.

In order to benefit from the provisions of Act 132 and Act 216,the taxpayer must inform in Column (F) the long-term capitalgains and losses of qualified property or new constructionproperty that has been acquired between September 1, 2010and June 30, 2013. The totally exempt gains will be used forinformation purposes only, therefore, do not include them inColumn (G).

In the case of gains that are 50% exempt, the taxpayer mustinclude in Column (G) the 50% of Column (F). On the otherhand, the losses determined in Column (F) will also have to beincluded in Column (G). This way, they can be applied againstother gains, if any, deducted against other income or carriedover to future years.

Line 8 – Add the amounts shown in Column (G) and enter theresults on this line.

Line 9 - Refer to the instructions for line 2 of Part I.

Line 10 - Refer to the instructions for line 3 of Part I.

Line 11 – Refer to the instructions for line 4 of Part I.

Line 12 – Enter the lump-sum distributions (amounts payableduring the same taxable year) under a variable or fixed annuity

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contract that were received by the taxpayer. You can elect onSchedule A2 Individual, to treat this distribution as a long-termcapital gain subject to the preferential rate of 15%, pursuant toSection 1023.08 of the Code. The taxpayer must include withthe return a detail with a breakdown of the total distributionreceived, cost of the annuity and taxable amount. Totaldistributions from a variable annuity will be reported on Form480.7C. Such distributions will be identified in Box 23 withDistribution Code M (Annuity).

Line 13 – Enter the lump-sum distributions under a variable orfixed annuity contract received by your spouse. You can electon Schedule A2 Individual, to treat this distribution as a long-term capital gain subject to the preferential rate of 15%, pursuantto Section 1023.08 of the Code. The taxpayer must includewith the return a detail with a breakdown of the total distributionreceived, cost of the annuity and taxable amount. Totaldistributions from a variable annuity will be reported on Form480.7C. Such distributions will be identified in Box 23 withDistribution Code M (Annuity).

Line 14 – Refer to the instructions for line 5, Part I.

Line 15 - Enter the net long term capital gain (or loss) generatedby a resident individual investor under Act 22-2012, asdetermined in Schedule F1 Individual, Part III, line 1, Column(E). For additional information, refer to the instructions ofSchedule F1 Individual.

Line 16 – Refer to the instructions for line 6, Part I.

PART III – LONG-TERM CAPITAL ASSETS GAINS ANDLOSSES REALIZED UNDER SPECIAL LEGISLATION

You must inform in this part only long-term capital gains andlosses derived from the sale of shares or other property from abusiness that operates with a decree granted under any specialact, or that operates and benefits from any special act in which aspecial tax rate is provided in lieu of the tax imposed by the Code.

Lines 18, 19 and 20 – Enter the result of Column (F) on eachone of these lines. Identify the act under which you received thebenefit and include the number of the decree that grants you thespecial treatment, if applicable.

PART IV – TOTAL DISTRIBUTIONS FROM QUALIFIEDPENSION PLANS

Enter the lump-sum distribution from pension plans qualified bythe Department received during the same taxable year of theparticipant (one payment or various payments during the sameyear) due to separation from service or termination of plan.Indicate the distribution date, the total lump-sum paymentreceived, basis and exempt income, and taxable amount. Also,indicate if you prepaid any tax.

Total distributions from qualified pension plans subject to therates of 20% or 10% will be reported and identified as lump-sum distributions from governmental or private plans on Form480.7C. They will be identified in Box 23 of Form 480.7C witha Distribution Code: A- Retirement, B- Separation from Service,C- Death or E- Plan Termination.

The basis of the distribution includes amounts for which the tax wasprepaid under Act 87-2006, as amended, Section 1023.21 of theCode and after-tax contributions. If the basis includes any prepaidamount, select the corresponding oval. If exempt income is reportedin Box 20 of Form 480.7C, you must include this amount as part ofthe basis of the distribution in Column (B). The difference betweenColumn (A) and Column (B) cannot be less than zero (“0”).

Line 21 – Enter the distributions received by the taxpayer ifthe employee’s trust that is part of the plan does not meet therequirements established on line 23. These distributions aretaxable at the 20% preferential tax rate.

If tax withheld is reported in Box 6 of Form 480.7C, enter inColumn A of this line the amount reported in Box 16 of Form480.7C and in Column C the amount reported in Box 17 ofForm 480.7C.

To determine the basis to be included in Column B, amountsreported in Boxes 18, 19 and 20 of Form 480.7C will be used.

Line 22 – Enter the distributions received by the spouse if theemployee’s trust that is part of the plan does not meet therequirements established on line 23. These distributions aretaxable at the 20% preferential tax rate.

If tax withheld is reported in Box 6 of Form 480.7C, enter inColumn A of this line the amount reported in Box 16 of Form480.7C and in Column C the amount reported in Box 17 ofForm 480.7C.

To determine the basis to be included in Column B, amountsreported in Boxes 18, 19 and 20 of Form 480.7C will be used.

Line 23 – Enter the distributions received by the taxpayer ifthe following requirements are met:

• the trust that is part of the plan is organized under the lawsof the Government of Puerto Rico, or

• the trust has a Puerto Rico resident fiduciary acting aspaying agent, and

• 10% of the trust’s assets attributable to participants residentsof Puerto Rico, determined at the close of the plan’s yearduring which the distribution is made and during eachone of the plan’s two years preceding the date of thedistribution have been invested in registered investmentcompanies organized under the laws of Puerto Rico andsubject to tax under Section 1112.01 of the Code, or inproperty located in Puerto Rico as defined in AdministrativeDetermination No. 08-15 of December 29, 2008.

These distributions are taxable at the 10% preferential tax rate.

If tax withheld is reported in Box 7 of Form 480.7C, enter inColumn A of this line the amount reported in Box 16 of Form480.7C and in Column C the amount reported in Box 17 ofForm 480.7C.

To determine the basis to be included in Column B, amountsreported in Boxes 18, 19 and 20 of Form 480.7C will be used.

Line 24 – Enter the distributions received by your spouse andthat at the same time meet the requirements established on line23. These distributions are taxable at the 10% special tax rate.

Do not include in this Part IV those total distributions of a qualifiedretirement plan that were due from separation of service or plantermination for which the 20% or 10% withholding at sourcerequired under Section 1081.01(b)(3)(A) of the Code has notbeen made. Those distributions will be considered as ordinaryincome and will be reported in Part IV of Schedule F Individual.

PART V - NET CAPITAL GAINS OR LOSSES FORDETERMINATION OF THE ADJUSTED GROSS INCOME

Line 26 - Enter here only the net capital gains determined onlines 7, 17 and 18 through 20.

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Column A - Enter the net short-term capital gain, if any,determined in Part I, line 7, Column (F).

Column B - Enter the net long-term capital gain, if any,determined in Part II, line 17, Column (G).

Column Cthrough E - Enter the net long-term capital gain realized from

the sale of shares or other property under theprovisions of special legislation, if any, determinedin Part III, lines 18, 19 and 20, Column (F).

Line 27 - Enter here only the net capital losses determined onlines 7, 17 and 18 through 20.

Column A - Enter the net short-term capital loss, if any,determined in Part I, line 7, Column (F).

Column B - Enter the net long-term capital loss, if any,determined in Part II, line 17, Column (G).

Column Cthrough E - Enter the net long-term capital loss realized from

the sale of shares or other property under theprovisions of special legislation, if any, determinedin Part III, lines 18, 19 and 20, Column (F).

Line 28 - This line must be used when one or more of ColumnsB through E reflect a loss on line 27. Such loss will be appliedproportionally to the gain, if any, reflected in the others Columnsof line 26, except Column A. If the others Columns do not reflecta gain on line 26, enter zero in the box.

Line 30 - If line 27, Column A reflects a loss, apply the sameproportionally to the gains, if any, reflected on line 26. If noColumn reflected gains on line 26, enter zero.

On this line, the net short-term capital loss reflected on line 27,Column A, is applied proportionally to the long-term capitalgains reflected on line 26, Columns B through E, after havingapplied proportionally the net long-term capital losses of theother categories.

Line 34 - The amount of the deduction for net capital loss notused in previous years will be the smaller of the amountdetermined on line 38 of Part VI or 90% of the net capital gaindetermined on line 33.

In order to claim the deduction for the net capital loss not usedin previous years, the taxpayer must complete Part VI of thisSchedule in its entirety. Any balance not claimed can be claimedin future years subject to the carryover period established inSection 1034.01 of the Code.

Line 35 - If you derived a net capital gain, the excess of the netlong-term capital gain over the net short-term capital losses,must be transferred to Part VII of this Schedule to determine thenet long-term capital gain for each tax rate. Once you completePart VII, go to Schedule A2 Individual for the tax computation.

If the amount on line 33 is a net capital loss, then continue withline 36.

Line 36 - If the amount on line 33 of this Schedule is a loss,enter on this line and in Part 1, line 2B of the return or in Part I,on line 3B of Schedule CO Individual, as applicable, the smallerof the following: (a) the loss reflected on line 33, or (b) ($1,000).If you have a net capital loss derived from the sale or exchangeof assets, you may deduct up to $1,000 on your return.

Line 37 - Any capital losses not used during the taxable yearmay be used against any capital gain derived in the future, asindicated below.

In those cases where the amount of the loss presented on thisline is composed by more than one concept, complete Part VIwhere you will provide a detail of each loss, date of origin,amount to be claimed and the carryover loss for future years.

Capital losses may be claimed only up to 90% of the netcapital gain generated for the taxable year in which suchlosses are carried, or $1,000 whichever is less.

PART VI – DETERMINATION OF THE NET CAPITAL LOSSCARRYOVER

Enter the detail of the capital losses generated in previousyears and that have not been used. For each one of the lossesto be considered include the year in which it was generated,the amount of the loss, the amount previously used, the carryforward amount and its respective expiration date.

Carryover of Capital Losses

The carryover period for the capital losses will depend on thedate in which the losses were generated, as indicated below:

• For taxable years beginning after June 30, 1995 and beforeJanuary 1, 2006, any loss not used can be carried over fora period of 5 years.

• In case of net capital losses realized during taxable yearsbeginning after December 31, 2005 and before January 1,2013, the carryover period is 10 years.

• Losses realized on taxable years beginning after December31, 2012 will be considered short-term capital losses ineach one of the subsequent 7 taxable years, up to the limitin which such amount exceeds the total of any net capitalgain of any taxable year mediating between the year inwhich the loss was generated and the subsequent taxableyear.

• Nevertheless, if a loss was realized under the provisions ofAct 132 or Act 216, the same may be used against anycapital gain derived in the future, and if there is any remainingloss, you may claim it as a deduction in each one of thesubsequent 15 years.

Total capital loss carryover determined on line 38 must betransferred to line 34, Part V of this Schedule.

PART VII - DETERMINATION OF THE NET LONG-TERMCAPITAL GAIN - FOR EACH TAX RATE

This Part will be used to determine the amount of net long-termcapital gain than will be transferred to the corresponding columnson line 4(a) of Schedule A2 Individual. Follow the instructionsprovided on each line.

Transfer the total net capital gain determined on line 8, ColumnG of this schedule, to line 4(a), Column A of Schedule A2Individual. You must transfer the long-term capital gaindetermined on line 6(a), Column B of this Schedule, to line4(a), Column C of Schedule A2 Individual. In the case of acapital gain determined under special legislation, the amountdetermined on line 6(b), Columns C through E of this schedule,must be transferred to line 4(a), Columns F, G and H of ScheduleA2 Individual, as applicable.

On the other hand, if the net capital gain includes a net short-term capital gain, it will be part of the calculation of the regulartax to be determined in Column A of Schedule A2 Individual.This is due to the fact that short-term capital gains are taxable atthe regular tax rates. For additional details on the taxation ofshort- term capital gains, see instructions for line 4(a) of ScheduleA2 Individual.

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SCHEDULE D1 INDIVIDUAL - SALE OR EXCHANGEOF PRINCIPAL RESIDENCE

If you sold or exchanged your principal residence during theyear, you must complete this Schedule.

Under Act 216-2011, if you sold your principal residenceon or after November 1, 2011, the total net long-termcapital gain is exempt from income tax, including thealternate basic tax.

For these purposes, it is considered “principalresidence” a housing unit that has been occupiedcontinuously by the seller and his/her family for the last2 years preceding the sale.

It is a requirement that you complete this Scheduleeven if the gain is exempt.

COMPUTATION OF GAIN

Line 1 - Enter the date of sale of the residence. This dateappears on the Sale and Purchase Deed.

Line 2 – If you answered “Yes”, complete the rest of theSchedule to determine the total net gain that is exempt from thepayment of taxes. If you answered “No”, go to Schedule DIndividual, Part I or II, as applicable.

Line 3 - If you used funds from your Individual RetirementAccount (IRA) to purchase your principal residence, thesefunds are taxable when the residence is sold. Select thecorresponding oval to indicate whether these funds belongs tothe taxpayer or spouse and enter the amount withdrawn fromthe IRA to purchase the residence. Transfer to Schedule FIndividual, Part I.

Line 4 - Enter the selling price of the residence, without includingpersonal property items. Generally, the sale price includes thecash received from the sale plus the mortgages assumed bythe purchaser.

Line 5 - Enter the expenses incurred in order to sell theresidence. These expenses include sales commissions,advertising, legal, appraisal and other expenses. Lodgingexpenses (i.e. hotels) nor travel expenses (i.e. airplane tickets)are not considered selling expenses. Include on this line fixing-up expenses that you paid in order to sell the residence.

Fixing-up expenses include repair, maintenance, painting andcleaning expenses paid in order to facilitate the sale of theproperty. However, to qualify, the expenses must be:

• for work performed during the 90 day period ended onthe date in which the sales contract of the old residencetook place;

• paid no later than 30 days after the date of sale of theresidence.

The fixing-up expenses do not include amounts paid forpermanent improvements. To claim said expenses, seeinstructions for line 7.

Line 7 - Enter the adjusted basis of the residence sold. Theadjusted basis is the original cost of the residence and itspermanent improvements, less the accumulated depreciation, ifthe property was used to produce income during its possession.

Also, the adjusted basis of the property will include the increasein accumulated value of such property for which the 5% specialtax rate was prepaid during the period of July 1, 2006 toDecember 31, 2006, as provided in Section 1014A of the 1994Code, and of 8% during the period from July 1, 2014 to April30, 2015 in accordance with Section 1023.21 of the 2011 Code.If you made a prepayment during the indicated periods, selectthe corresponding oval. You must keep copy of Form SC2731 with the corresponding Schedule for a period notshorter than 6 years.

Line 8 – Enter the gain realized on the sale. If the gain wasrealized on the sale of a principal residence under theprovisions of Act 216-2011, the same is exempt from thepayment of income tax. Transfer this amount to Schedule IEIndividual, Part II, line 17.

It is important to point out that if your principal residence does notcomply with the definition provided by Act 216-2011 but you areinterested to benefit from the provisions of Sections 1034.04(m)and 1031.02(a)(16) of the Code related to the gain deferment andthe once in a life exemption for taxpayers age 60 or older,respectively, refer to Schedule D3 Individual available in ourwebpage under the “Schedules” topic.

SCHEDULE DDC INDIVIDUAL - DUE DILIGENCECHECKLIST BY ACCREDITED AGENT - TAX RETURNSSPECIALIST

Use this Schedule to make the election provided under Section1021.02(a)(2)(D) of the Code, to submit with the return the duediligence checklist form, instead of the Agreed Upon ProceduresReport ("AUP") prepared by a CPA. This option is availablefor individuals engaged in trade or business with businessvolume of less than $1 million and subject to the payment ofalternate basic tax.

Schedule DDC Individual must be completed and certified byan Accredited Agent-Tax Returns Specialist who meets therequirements provided by Section 6074.01 of the Code. Thetaxpayer's name and social security number, and the nameand Accredited Agent-Tax Returns Specialist number must beprovided in the indicated spaces. The Accredited Agent-TaxReturns Specialist Number shall be the Specialist ID assignedby the Department's Tax Practitioners and Education Division.

If for the taxable year, the taxpayer submits audited financialstatements or an AUP with the return, this schedule shall not berequired.

PART I - DETAIL OF EXPENSES

The ordinary and necessary expenses, and the amounts listedin this part require to be verified. If this requirement is met, theymay be claimed as a deduction on the taxpayer's return forpurposes of determining the net income subject to alternatebasic tax.

PART II - DUE DILIGENCE REQUIREMENTS

The Accredited Agent-Tax Returns Specialist must answer eachof the questions listed in this part to confirm that you have met allthe due diligence requirements, as provided in Section1021.02(a)(2)(D) of the Code.

PART III - CERTIFICATION

In this part, the Accredited Agent-Tax Returns Specialist certifythat have met all due diligence requirements, and as requiredby Section 1021.02(a)(2)(D) of the Code, by means of his

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signature, declares under penalty of perjury that has examinedthe information included in the form and that it is true, correct,and complete.

Also accept that, if not complied with all the due diligencerequirements mentioned, are subject to the suspension of theAccredited Agent-Tax Returns Specialist license by theDepartment. In the case that the Department determine that anyof the amounts included in the form and claimed as a deductionby the taxpayer are not supported with documentary evidence,it will be subject to the payment of fine and other applicablepenalties provided in Section 6074.03 of the Code.

For additional information, refer to Internal Revenue CircularLetter No. 21-03.

SCHEDULE E – DEPRECIATION

This Schedule must be completed by those taxpayers who areengaged in an industry or business, or who derived incomefrom manufacturing, sale of goods, services rendered, farmingand rent.

The same will be used to inform each of the properties for whichyou claim depreciation. There are spaces for current, flexibleand accelerated depreciation; amortization, automobiles andvehicles under financial leases.

On this schedule you must provide the following information:

• classification of the property;• date acquired;• allowable cost or basis;• depreciation claimed in previous years;• estimated useful life to determine the depreciation; and• depreciation claimed in the current year.

For properties acquired from January 1, 2010, it is allowed touse the provisions of the Federal Internal Revenue Code andits Regulation in those cases in which Section 1033.07 or1040.12 of the Code does not establish depreciation periodsfor certain tangible property.

Line (b) - Flexible Depreciation

In order to be entitled to claim flexible depreciation in lieu ofcurrent depreciation, the Code requires you to make an optionthrough a sworn statement to be filed no later than 30 days afterthe end of the taxable year. Said option may be exercised onlyfor property acquired by the taxpayer prior to June 30, 1995.

Line (c) - Accelerated Depreciation

The Code grants a deduction for accelerated depreciation inlieu of current depreciation. In order to be entitled to thisdeduction, the taxpayer is required to make an election withhis/her return to use the accelerated depreciation method. Saidelection may be exercised only for property acquired by thetaxpayer during taxable years commenced after June 30,1995.The aforesaid election, once made, is irrevocable.

Refer to the Code and its regulations to determine whoqualifies for the deduction under the flexible andaccelerated depreciation methods and the requirementsthat must be met to be able to enjoy this deduction.

Line (d) - Amortization

In the case of property that constitutes goodwill acquired bypurchase during taxable years commenced after June 30, 1995,

a deduction for amortization shall be allowed using the straight-line method and a fifteen (15) years useful life.

In the case of intangible property, other than goodwill, acquiredby purchase or developed in taxable years after December31, 2009, an amortization deduction shall be allowed, using thestraight-line method and a useful life of fifteen (15) years or theuseful life of said intangible property, whichever is less.

Line (e) – Automobiles

For property that is an automobile it is allowed a deduction fordepreciation up to $6,000 annually per automobile, up to amaximum of $30,000 for the automobile's useful life.

If the taxpayer is a seller, the amount of the depreciationdeduction can not exceed $10,000 annually per automobile,up to a maximum of $30,000 for the automobile's useful life.

If the automobile is used by the taxpayer in his/her trade orbusiness or for the production of income and is also used forpersonal purposes, the amount of this deduction will be reducedby the amount of its personal use.

In the case of cars under operating leases, the amount of rentpaid during the taxable year shall be allowed as a deductionfor depreciation up to a maximum of $6,000 annually perautomobile or $10,000, if the taxpayer is a seller. Include onthis line, the lease rental payments for automobiles underoperating leases up to the limits indicated above. Do notinclude them as a deduction for rent, interests, costs ofmotor vehicles or any other item other than depreciationon Schedules J, K, L, M or N Individual.

Line (f) - Vehicles under financial leases

In the case of leased automobiles that are essentiallyequivalent to a purchase, instead of current depreciation, itis allowed a deduction for the use of the automobile for theamount paid during the taxable year up to $6,000 annually perautomobile, up to a maximum of $30,000 for the automobile'suseful life. See Section 1033.07(a)(3)(D) of the Code for thedefinition of a lease that is essentially equivalent to a purchase.

If the taxpayer is a seller, it will be allowed as a deduction theamount paid for the lease of the automobile during the taxableyear for an amount not exceeding $10,000 annually perautomobile, up to a maximum of $30,000 for the automobile’suseful life.

Enter on this line the amount of lease payments that aresubstantially equivalent to a purchase, subject to the limitationspreviously indicated. Do not include the interest portion as partof the payments. Indicate also, the number of vehicles for whichyou made lease payments.

You must provide with your return the information required ofForm 480.7D.

Do not include on this line regular lease payments forleased automobiles (“operating leases”). These arereported on line (e).

Include this Schedule with your return.

SCHEDULE E1 - DEPRECIATION FOR BUSINESSESWITH VOLUME OF $3,000,000 OR LESS

Use this Schedule to itemize the information related todepreciation expense in the case of businesses that during the

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Even when these income can be attributed to the spouse whoreceived or generated them, in the case of taxpayers who filethe income tax return under the “Married” personal status, theymay choose to complete only one Schedule F Individual. In thiscase, select the oval in the heading of this Schedule to identifythat the income belongs to both spouses.

However, if the marriage chooses the optional computation oftax, you must complete and submit with your return a ScheduleF Individual for each one of the spouses who receives orgenerates this type of income. In this case, select the oval thatidentifies the taxpayer or his/her spouse, as applicable.

PART I - DISTRIBUTIONS FROM INDIVIDUAL RETIREMENTACCOUNTS AND EDUCATIONAL CONTRIBUTIONACCOUNTS

Enter in the indicated spaces, the payer’s name, the employeridentification number of such person, the account number andthe total distribution from an Individual Retirement Account orEducational Contribution Account. Indicate, also, if the distributionincludes a portion for which you prepaid the tax under Sections1169A or 1169C of the 1994 Code or under Section 1023.23 ofthe Code. If you choose the optional computation oftax, remember to complete a Schedule F Individual forthe spouse who had received this type of income.

The basis of the distribution includes any amount for which youprepaid the tax, exempt income and voluntary contributions.

The taxable amount, difference between the total distribution(Column A) and the basis (Column B), must be distributedbetween Columns C through H, as applicable. The differencebetween Column A and Column B cannot be less than zero(“0”).

It is important to point out that, if this taxable year you havemade the sale or exchange of your principal residence andhad used funds from an Individual Retirement Account (IRA) toacquire said property, these funds are taxable at the time of thesale. Enter in the provided space on Part I, Columns A and H,the amount of previously used IRA funds to acquire your principalresidence.

Column C - Enter that part of the distribution received from anIndividual Retirement Account (IRA) or Educational ContributionAccount that constitutes interests earned on funds from the sameon which you did not elect the option to pay taxes at the rate of10%. This information comes from Box 12D of Form 480.7(Informative Return – Individual Retirement Account) and fromBox 8B(1) of Form 480.7B (Informative Return – EducationalContribution Account). You must provide the required informationfrom these forms with the return.

These interests will be transferred to Part I, line 1(b),Column D of Schedule FF Individual.

Column D - Enter that part of the distribution received from anIndividual Retirement Account (IRA) or an EducationalContribution Account that constitutes interests earned on fundsfrom the same on which you elected the option to pay tax at thetax rate of 10%. This information comes from line 12D of Form480.7 and from Box 8B(1) of Form 480.7B, as long as Boxes7 and 6 of Forms 480.7 and 480.7B, respectively, reflect awithheld amount. You must provide the information requiredfrom these forms with the return.

The tax withheld on such interests, reported in Box 7 of Form480.7 and in Box 6 of Form 480.7B, must be informed on lines6(b) and 6(c), Part III of Schedule B Individual, as applicable.

taxable year have generated a business volume of $3,000,000or less.

The information of each of the properties for which thedepreciation is claimed shall be provided. These are: computersystems; ground transportation equipment (except automobiles);and machinery and equipment, furniture and fixtures, and anyother fixed assets to be used in the industry or business. Also,you must fill in the oval provided in each section, as applicable,to make the election for this depreciation.

You must provide in this schedule the following information:

• type of property;• date acquired;• allowable cost or basis;• depreciation claimed in prior years; and• depreciation claimed in the current year.

Line (a) - Computer systems (Section 1033.07(a)(1)(G))

You may elect to deduct the total cost of the computer systemsequipment and its installation in the year of acquisition orinstallation thereof. Equipment previously depreciated oracquired from a related person, do not qualify to accelarate theallowance of depreciation.

Line (b) - Ground transportation equipment, exceptautomobiles (Section 1033.07(a)(1)(H))

You may determine the deduction for depreciation using a usefullife of two (2) years for ground transportation equipment, exceptautomobiles (as defined in Section 1033.07(a)(3)(B) of theCode), and environmental conservation equipment.

Line (c) - Machinery and equipment, furniture andfixtures and any other fixed assets to be used in theindustry or business (Section 1033.07(a)(1)(K))

For taxable years commenced after December 31, 2018, youmay determine the deduction for depreciation using a useful lifeof two (2) years for machinery and equipment, furniture andfixtures and any other fixed assets to be used in the industry orbusiness, except real estate, automobiles and property subjectto the terms of lines (a) and (b) of this schedule.

Complete this Schedule only if you are going to elect to acceleratethe depreciation of the assets previously described on thisSchedule. This election is irrevocable and you should considerthat once exercised, the amount of depreciation computed in thebooks on these assets will not be deductible to determine the netincome subject to income tax in the returns for subsequent years.

Include this Schedule with the return.

SCHEDULE F INDIVIDUAL - OTHER INCOME

The following types of income will be reported on this Schedule:distributions from Individual Retirement Accounts andEducational Contribution Accounts, distributions and transfersfrom governmental plans, distributions from deferredcompensation plans and distributions from qualified retirementplans (partial or lump-sum), income from discharge of debts,income from the use of intangibles, income from judicial orextrajudicial indemnifications, income from sports teams ofinternational associations or federations, distributable share onnet income subject to preferential rates from pass-through entitiesand any other miscellaneous income for which a specific line onthe return is not provided. It will also be included, the Distributionsdue to a disaster declared by the Governor of Puerto Rico.

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These interests will be transferred to Part I, line 1(b),Column B, of Schedule FF Individual.

Column E - Enter that part of the distribution received from anIndividual Retirement Account (IRA) that constitutes interestsearned on funds from the same and taxable at 10%. Thisinformation comes from Box 12G(2) of Form 480.7 if you electthe option to pay the rate of 10%. You must provide the requiredinformation from these forms with the return.

The tax withheld on such interests, reported in Box 9 of Form480.7, must be informed on line 15, Part III of Schedule BIndividual.

These interests will be transferred to Part I, line 1(b),Column E of Schedule FF Individual.

Column F – If the owner or beneficiary of the IRA receives atotal or partial distribution and is a pensioner of the EmployeesRetirement System of the Government of Puerto Rico and itsInstrumentalities, the Judicature Retirement System or theTeachers Retirement System, enter in this column the amountdistributed, that does not constitute a distribution of yourcontributions, if you elected the option to pay the preferentialtax rate of 10%. That part of the distribution which constitutesyour contribution to the IRA, must be reported in Column H.This information comes from Box 12G(3) of Form 480.7 if youelect the option to pay the rate of 10%. You must provide theinformation required from this forms with the return.

The tax withheld on such interest, reported in Box 9 of Form480.7, must be informed on line 15, Part III of Schedule B Individual.

Do not include the interests received in this part. Thesame must be reported in Column E.

Column G - If the owner or beneficiary of the IRA or EducationalContribution Account receives a total or partial distribution thatis not an interest distribution received from financialinstitutions engaged in trade or business in Puerto Rico(as provided in Section 1023.04 of the Code), neither adistribution of the contributions to your IRA and whichconsists of income from sources within Puerto Rico received bysaid IRA, enter the amount distributed in this column if youelected the option to pay the preferential tax rate of 10%.

This information comes from Box 12E of Form 480.7 and fromBox 8B(3) of Form 480.7B, if you elect the option to pay therate of 10%. You must provide the information required fromthese forms with the return.

The tax withheld on such amount, reported in Box 8 of Form480.7 and in Box 7 of Form 480.7B, must be informed on lines14(a) and 14(b), Part III of Schedule B Individual, as applicable.

Column H - Enter the remainder of the distribution receivedfrom an Individual Retirement Account (IRA) or an EducationalContribution Account which does not correspond to the previouscolumns.

Line 1 - Totalize the amounts included in Columns A through H,respectively. Transfer the total of Columns F and G to line4(k) of Schedule A2 Individual to determine the tax atthe corresponding preferential rate.

Line 2 - Add the total distributions from Individual RetirementAccounts (IRA) or Educational Contribution Accounts of ColumnsF through H, including distributions or portion thereofsubject to preferential rates, and transfer it to Part 1, line 2F ofthe return or to Part I, line 3F, Columns B and C of Schedule COIndividual.

The 10% tax withheld on IRA distributions toGovernment pensioners or to IRA or EducationalContribution Account distributions consisting ofincome from sources within Puerto Rico, will be creditedagainst your tax liability.

Transfer the amounts withheld to Schedule B Individual,Part III, lines 14 or 15, as applicable.

Submit with your return the information required of theInformative Return – Individual Retirement Account(Form 480.7) or the Informative Return - EducationalContribution Account (Form 480.7B), as applicable.

PART II – DISTRIBUTIONS AND TRANSFERS FROMGOVERNMENTAL PLANS

You must inform the total lump-sum distributions from governmentalplans received during the same taxable year due to theparticipant’s separation from service and rollovers of the balancein the savings account of the participants in the Retirement SavingsAccounts Program to a Non Deductible Individual RetirementAccount when they terminate the public service.

Governmental plans include retirement plans under theEmployees Retirement System of the Government of PuertoRico, the Teachers Retirement System, the Retirement Systemof the University of Puerto Rico, and the Employees RetirementSystem of the Electric Power Authority.

Indicate the date and total amount of the distribution. The basisof the distribution includes amounts for which you prepaid thetax during the period of November 15, 2006 to December 31,2006 under Section 1012D of the 1994 Code, exempt incomeand exempt contributions according to Article 1 of Act No. 415 ofMay 13, 1950. Select the corresponding oval if you made aprepayment. If you choose the optional computation oftax, remember to complete a Schedule F Individual forthe spouse who had received this type of income.

Line 1C - Enter the difference between Column (A) and Column(B), but not less than zero (“0”), of the distributions fromgovernmental plans (except the Retirement Savings AccountsProgram).

Line 1D - Enter the difference between Column (A) and Column(B), but not less than zero (“0”), of the distributions under$10,000 from the Retirement Savings Accounts Program.

Line 2E - Enter the difference between Column (A) and Column(B), but not less than zero (“0”), of the distributions of $10,000or more from the Retirement Savings Accounts Program onwhich the 10% preferential tax had been withheld at source.Transfer this amount to line 4(k) of Schedule A2Individual to determine the tax at the correspondingpreferential rate.

Line 2F - Enter the difference between Column (A) and Column(B), but not less than zero (“0”), of the amounts transferred fromthe Retirement Savings Accounts Program to a Non DeductibleIndividual Retirement Account subject to the 10% preferentialtax rate. Transfer this amount to line 4(k) of Schedule A2Individual to determine the tax at the correspondingpreferential rate.

Line 3 - Add the total distributions and transfers from governmentplans of Columns C through F, including distributions andtransfers subject to preferential rates, and transfer it toPart 1, line 2E of the return or to Part I, line 3E, Columns B andC of Schedule CO Individual.

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PART III – DISTRIBUTIONS FROM DEFERREDCOMPENSATION PLANS (NON QUALIFIED)

Enter in the indicated space the date and total amount of thedistribution from a Deferred Compensation Plan. Indicate, also,if the distribution includes a portion for which the tax was prepaidunder Section 1012D of the 1994 Code or under Section1023.21 of the 2011 Code. If you choose the optionalcomputation of tax, remember to complete a ScheduleF Individual for the spouse who had received this typeof income.

Line 1B - The basis of the distribution includes any amount forwhich you prepaid the tax under Section 1012D of the 1994Code and Section 1023.21 of the 2011 Code, exempt income,and after-tax contributions.

Line 1C - Enter the difference between Column (A) and Column(B), but not less than zero (“0”), of the distributions from deferredcompensation plans received during the year. Transfer thisamount to Part 1, line 2L of the return or to Part I, line 3L ofSchedule CO Individual, as applicable.

PART IV - DISTRIBUTIONS FROM QUALIFIEDRETIREMENT PLANS (PARTIAL OR LUMP-SUM)

Enter in the indicated space the date and total amount of thepartial or total distribution from a qualified retirement plan.Indicate, also, if the distribution includes a portion for which thetax was prepaid under Section 1165(b)(9) of the 1994 Code orunder Section 1023.21 of the 2011 Code. If you choose theoptional computation of tax, remember to complete aSchedule F Individual for the spouse who had receivedthis type of income.

The amount of total or partial distribution from qualified retirementplans will be reported on a Form 480.7C. They will be identifiedin Box 23 of Form 480.7C with the Distribution Code thatcorresponds to the nature of the distribution.

Line 1B - The basis of the distribution includes any amount forwhich you prepaid the tax under Section 1165(b)(9) of the1994 Code and Section 1023.21 of the Code of 2011, exemptincome, and after-tax contributions.

Line 1C - Enter the difference between Column (A) and Column(B), but not less than zero (“0”), of the distributions receivedduring the year. Transfer this amount to Part 1, line 2L of thereturn or to Part I, line 3L of Schedule CO Individual, asapplicable.

You must also transfer to this Part IV those total distributions of aqualified retirement plan that were due to separation of serviceor plan termination for which the 20% or 10% withholding atsource required under Section 1081.01(b)(3)(A) of the Codehas not been made. Those distributions will be reported followingthe instructions presented in this Part IV for total distributions notdue to separation from service or plan termination.

PART V – OTHER INCOME

Column A – Enter the amount of income from discharge ofdebts reported in Box 7 of Form 480.6A. Refer to the instructionsof line 5, Part I of Schedule IE Individual where the requirementsto consider this payments exempt of tax are discussed.

Column B – Enter here the amount of income from royaltiesreported in Boxes 8 and 9 of Form 480.6C. Also enter hereany other income received for the use of other intangibles(patents, copyrights, etc.).

Column C – Enter the amounts received from judicial orextrajudicial indemnification, paid under a judgment issued by

the Court or under an extrajudicial claim, that constitute taxableincome. If you choose the optional computation of tax,this income is attributed individually to the spouse towhom it corresponds.The term taxable income includes, among others:

1. any part of the compensation that represents or substituteslosses from income or salaries, including ceased profits; and

2. the indemnification from lost or ceased salaries in cases ofjob suspension or termination, and from illegal dismissals.

The amounts received from judicial or extrajudicial indemnificationare subject to a 10% withholding of tax at source. Provide theinformation required from Box 1 of Form 480.6B. Enter the taxwithheld on Schedule B Individual, Part III, line 10.

Line 1 - Transfer the result of the sum of Columns A and F tothe (Total $ ______) line that is included on line 2(G) of Part 1,page 2 of the return or to Part I, line 3(G) of Schedule COIndividual, as applicable.

Column D - You must inform income received from sportsteams of international associations or federations, subject to the20% withholding at source. If you choose the optionalcomputation of tax, this income is attributed individuallyto the spouse to whom it corresponds. Provide theinformation required from Box 4 of Form 480.6B. Enter the taxwithheld on Schedule B Individual, Part III, line 20.

Column E – You must inform any other income received duringthe year attributed individually to the taxpayer or spouse andthat is not included in Columns A through D and F of this Part.For example, this Column will be used to report net incomefrom Puerto Rico sources under Section 1123(f) of the Code orthe income effectively connected with the conduct of a trade orbusiness in Puerto Rico for those taxpayers subject to theprovisions of Article 1123(f)-4(g) of Regulation No. 6257 underthe 1994 Code, as amended.

In this Column may be reported total distributions of fixed annuity,that have been acquired as investment instrument.

If you choose the optional computation of tax, remember tocomplete a Schedule F Individual for the spouse who hadreceived this type of income.

Column F - You must inform your distributable share on netincome subject to preferential rates from pass-through entities.If you choose the optional computation of tax, thisincome is attributed individually to the spouse to whomit corresponds. Provide the information required from PartIII, line 7 of the Informative Return Pass-Through Entity (Form480.60 EC). Enter the tax withheld on Schedule B Individual,Part III, line 11(e).

Line 2 - Include on this line according to each income categoryof Columns A through C and E, the ordinary and necessaryexpenses paid or incurred to generate them such as bankcharges, brokerage commissions, fees, etc. These expensescannot exceed the total income generated included on line 1 foreach income category.

Line 3 - Determine the amount of taxable income for eachcategory by subtracting the expenses (line 2) from the total(line 1). The income from sports team of internationalassociations or federations will be transferred to line4(g) of Schedule A2 Individual to determine the tax atthe corresponding preferential rate. Likewise, thedistributable share on net income subject to preferentialrates from pass-through entities (Column F) will betransferred to line 4(j) of Schedule A2 Individual.

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Line 4 - Add the subtotal of Columns A through F of line 3.Transfer this amount to Part 1, line 2G of the return or line 3G ofSchedule CO Individual, Columns B and C, as applicable.

PART VI - DISTRIBUTIONS DUE TO A DISASTERDECLARED BY THE GOVERNOR OF PUERTO RICO

This Part will include the Distributions made Due to a DisasterDeclared by the Governor of Puerto Rico according to theprovisions of Sections 1081.01(b)(1)(D), 1081.02(d)(1)(I) and(J) of the Code. You must provide in this part the requiredinformation, either from the employees trusts established by privatebusiness employers qualified under Section 1081.01 of the Code("Retirement Plans"), as well as from Individual RetirementAccounts ("IRA Accounts") established under Section 1081.02of the Code.

These Special Distributions must have to be requested by theEligible Individual to cover Eligible Expenses incidental to thedisaster declared by the Governor and shall be reported onForms 480.7 and 480.7C.

For purposes of this Part, the following definitions shall beconsidered:

Special Distributions: Payments or distributions in cash madefrom a Retirement Plan or an IRA during the period betweenFebruary 20 and December 31, 2020 (Eligible Period) andwhich have been requested by an Eligible Individual to coverEligible Expenses, according to Section1081.01(b)(1)(D)(vi)(II), 1081.02(d)(1)(I) and (J) of the Code,and to the provisions of the Internal Revenue Circular LettersNo. 20-09, 20-23, and 20-29.

Eligible Individual: Individual who during calendar year 2020is a bona fide resident of Puerto Rico, as provided in Section1010.01(a)(30) of the Code.

Eligible Expense: All expenses incurred by an EligibleIndividual to compensate the losses or damages suffered forreason of a Disaster Declared by the Governor of Puerto Ricoand extraordinary and unexpected expenses to cover basicneeds due to said disaster. As provided by Internal RevenueCircular Letters No. 20-09 and 20-23, the term Eligible Expenseshall include expenses related to the emergencies declared forthe earthquakes occurred in the southern area of Puerto Ricoand for the COVID-19, as well as any loss of income due to thecurfew declared by the Governor.

Disaster Declared by the Governor of Puerto Rico: Anydisaster occurred during the year that, regarding to the area inwhich the taxpayer resides, results in a subsequent designationby the Governor of Puerto Rico as an area whose residentsare eligible for aid under the disaster assistance programs ofthe Government of Puerto Rico.

Limitation: The total of the distributions shall not exceed onehundred thousand dollars ($100,000) and the total amountexempt of taxes shall not exceed the first ten thousand dollars($10,000) distributed within the term established by theSecretary.

To inform Special Distributions in this Part, it will be necessarythat the Eligible Individual submits to the employer that maintainsthe Retirement Plan or to the provider of management servicesfor the plan, or to the financial institution or insurance companythat maintains the account, the statement required by InternalRevenue Circular Letter 20-09 (IR CC 20-09). If such statementhas not been received, or the same does not comply with theprovisions established in IR CC 20-09, or if the distribution isnot made between the established Eligible Period (February

20 to December 31, 2020), the total distribution will not beconsidered as an Eligible Distribution, and therefore the sameshall not be reported in this Part.

Every individual who has received this type ofdistribution, must complete and include with his/herreturn a Schedule F Individual. In the case of marriedtaxpayers who file a joint return (whether or not underthe Optional Computation), must complete and includewith their return a Schedule F Individual for each spouse.In these the cases, select the oval that identifies thetaxpayer or spouse, as applicable.

Enter in the indicated spaces the name, employer identificationnumber of the person who made the payment, the accountnumber and distribution date. Also, indicate the form on whichthe distribution was reported by selecting the correspondingoval (Form 480.7 or Form 480.7C).

In the case of Retirement Plans, only those distributions madeas total distributions or in the form of partial payments shall beconsidered. The distributions in the form of annuity or periodicpayments are not considered eligible for these purposes.

In the case of IRA or Non Deductible IRA, the penalty providedin Section 1081.02 (g) of the Code will not be applicable.However, the individual may be subject to the penalties imposedby the financial institution or insurer according to the contract ordocument of the IRA or Non Deductible IRA.

Column A - Enter the amount of the distribution that is exemptfrom income tax, including the alternate basic tax. The exemptamount cannot exceed $10,000. If the distribution comes froman IRA, enter the amount reported in Box 12K(2) of Form480.7. If it comes from a Retirement Plan, enter the amount fromBox 21A of Form 480.7C.

Column B - Enter the amount of distribution that is subject toincome tax and withholding at source at a fixed rate of 10%.That is, distributions in excess of $10,000 but not more than$100,000. If the distribution comes from an IRA, enter theamount reported in Box 12K(1) of Form 480.7. If it comes froma Retirement Plan, enter the amount from Box 21B of Form480.7C.

Column C - Enter the amount of the distribution for whichyou prepaid the tax and the after-tax contributions made. Ifthe distribution comes from a IRA, enter the amount reportedin Box 12K(3) of Form 480.7. If it comes from a RetirementPlan, enter the amount from Boxes 21C and 21D of Form480.7C.

Line 3 - Enter the difference between line 1, Column D andline 2, but not less than zero ("0").

Line 4 - Determine the exempt amount, if any, among thelesser of the amount reflected on line 1, Column D or $10,000,provided that all the following requirements are met:

• The Total Distribution determined on line 1, Column Ddoes not exceed $100,000.

• The Total Exempt Amount determined on line 1, Column Adoes not exceed $10,000.

• The Total Tax withheld at source included on lines 6(a)and 6(b) must be at least 10% of the amount determinedon line 1, Column B.

In those cases in which all the requirements mentioned hereare not met, enter zero on this line and continue on line 5.

Transfer the amount determined as exempt to line 8, Part I ofSchedule IE Individual.

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Line 5 - Determine the amount that is taxable at 10% bysubtracting the exempt amount (line 4) from the total EligibleDistribution (line 3). Transfer the result to Part 1, line 2O, page2 of the return or to Part I, line 3O, Column B or C of ScheduleCO Individual, as applicable.

Also, this amount will be transferred to line 4(l) of Schedule A2Individual, as long as all the following requirements are met:

• The Total Distribution determined on line 1, Column Ddoes not exceed $100,000.

• The Total Exempt Amount determined on line 1, ColumnA does not exceed $10,000.

• The Total Tax withheld at source included on lines 6(a)and 6(b) must be at least 10% of the amount determinedon line 1, Column B.

In the event that any of the aforementioned requirements is notmet, the total distribution will be subject to the regular income taxrates and withholding at source established by the Code.

Line 6 - Enter on line 6(a) the total tax withheld at sourcereported in Box 10 of all Forms 480.7 that you have received.Likewise, enter on line 6(b) the total tax withheld at sourcereported in Box 22 of all Forms 480.7C received. You mustalso indicate the total Informative Returns (Forms 480.7 and480.7C) that have been prepared to you and which informationhas been reported in this Part VI.

For additional information on special distributions of qualifiedretirement plans and individual retirement accounts due to adisaster declared by the Governor of Puerto Rico, you mayrefer to the Internal Revenue Circular Letters No. 20-09, 20-23 and 20-29 available in our website: www.hacienda.pr.gov.

SCHEDULE FF INDIVIDUAL – INTERESTS,DIVIDENDS AND MISCELLANEOUS INCOME

The following types of income will be reported on this Schedule:interests, dividends from corporations, income from prizes andcontests and any other miscellaneous income for which a specificline on the return is not provided.

If you choose the optional computation of tax in the case ofmarried individuals living together and filing a joint return, theincome reported on this Schedule is attributed on a 50% basisto each spouse, therefore, they must complete only oneschedule. It is important to note that in the case of income frominterests, even though the total is attributed equally to bothspouses, each spouse may claim the exemption of up to $100provided by the Code in the case of interests received fromfinancial institutions engaged in the trade or business in PuertoRico. Therefore, in these cases the exemption may be up to$200.

PART I – INTERESTS

Enter in the indicated spaces, the payer’s name and employeridentification number, and the account number.

Column A - Enter the eligible interests earned from obligationsof corporations and partnerships, engaged in industry orbusiness in Puerto Rico, or upon new mortgages on residentialproperty located in Puerto Rico, if you elected to pay thepreferential tax rate of 10%.

The term eligible interests means any interest on bonds,notes or other obligations issued by a domestic or foreigncorporation or partnership engaged in trade or business inPuerto Rico, including shares in trusts representing an interestin such bonds, notes or other obligations, provided that theproceeds from these obligations are used only in the industry

or business in Puerto Rico of such corporation or partnershipwithin a period no longer than 24 months from the issuancedate of such obligations.

Also, any interest on mortgage loans on residential propertylocated in Puerto Rico issued after July 31, 1997, secured orguaranteed under the provisions of the National Housing Act ofJune 27, 1934, as amended, or under the provisions of theServicemen’s Readjustment Act of 1944, will qualify for theaforementioned preferential rate of 10%.

You must also include any interest in mortgage loans onresidential property located in Puerto Rico which interests arenot exempt under Section 1031.02 of the Code, and shares intrusts representing an interest over such loans (or any otherinstrument representing an interest in such loans), providedthat the interest recipient is not a financial institution as such termis defined in Section 1033.17(f) of the Code.

This information is obtained from Box 6 of Form 480.6B(Informative Return – Other Income Subject to Withholding).Provide the required information with your return.

You must also include in this Column the information that comesfrom line 1F, Part III of Form 480.60 F (Revocable Trust orGrantor Trust Informative Return).

Also include the information that comes from line 12, Part III ofForm 480.60 EC (Informative Return -Pass-Through Entity).

Column B – You must show the taxable interests from anIndividual Retirement Account or an Educational ContributionAccount from eligible financial institutions subject to withholding,if you exercised the option to pay a preferential tax rate of 10%over the excess of $100. This amount comes from Schedule FIndividual, Part I, line 1, Column D. Provide with the return theinformation from Form 480.7 (Informative Return - IndividualRetirement Account) or Form 480.7B (Informative Return -Educational Contribution Account), as applicable.

Column C – You must show the interests subject to withholdingfrom financial institutions if you exercised the option to pay apreferential tax rate of 10% over the excess of $100, withoutincluding taxable interests from an Individual RetirementAccount or an Educational Contribution Account. This informationis obtained from Box 5 of Form 480.6B. Provide the requiredinformation of the form with your return.

You must also include in this Column the information that comesfrom line 1E, Part III of Form 480.60 F if the 10% withholding isreflected in the Tax Withheld Column.

Also include in this Column the information from line 10, Part IIIof Form 480.60 EC.

Column D – Enter the interests received from eligible financialinstitutions, including interests generated from an IndividualRetirement Account or an Educational Contribution Account, forwhich the option to pay a preferential rate was not exercised.Provide the required information from Box 2 of Form 480.6A(Informative Return - Other Income Not Subject to Withholding).

You must also include in this Column the information from line1E, Part III of Form 480.60 F if the 10% withholding is reflectedin the Tax Withheld Column.

Also include in this Column the information from line 11, Part IIIof Form 480.60 EC.

Column E –Enter the interests earned from IndividualRetirement Accounts (IRA) received from distributions to certainGovernment pensioners, if you exercised the option to pay apreferential tax rate of 10% over the excess of $100. This

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amount comes from Schedule F Individual, Part I, line 1Column E.

For additional information refer to instructions of Part I ofSchedule F Individual. Provide the required information of Box12(G)(2) of Form 480.7.

Column F – Enter in this column other interests subject towithholding received or credited under the provisions of speciallegislation that provides for a preferential rate other than theones related to the interests included in Columns A through E.

You must also include in this Column the information from line1G, Part III of Form 480.60 F.

Also include in this Column the information from line 13, Part III ofForm 480.60 EC.

Column G – Enter the interests received or credited fromdeposits, certificates of deposit, current accounts in savingscooperatives and associations held in any commercial bank orfinancial institution located outside of Puerto Rico, or any otherinterest income not included in Columns A through F. Providethe required information from Boxes 3 and 4 of Form 480.6A,among others.

You must also include in this Column the information from line1H, Part III of Form 480.60 F.

Also include in this Column the information from line 13, Part III ofForm 480.60 EC if a percentage in ___% is not included.

If you receive federal informative returns with income subject totax in Puerto Rico (i.e. Forms 1099-INT or Federal K-1), youmust enter in this Column G the amounts of interest that areincluded in said forms.

Line 1(a) - Enter the sum of the total interests included in ColumnsA, C, D, F and G of Part I.

Line 1(b) – Enter the total of interests received during the yearfrom the concept of IRA (included on Schedule F Individual, PartI, Columns C and D) and interests for the concept of distributionsto Government pensioners (included on Schedule F Individual,Part I, Column E).

Line 1(c)-Transfer the result of the sum of Columns A to G to theline of (Total $______) that is included on line 2C, Part 1 of page2 of the return or to Part I, line 3C of Schedule CO Individual, asapplicable.

Line 2 – Include on this line according to each category ofinterest, the ordinary and necessary expenses paid or incurredto generate them such as bank charges, brokerage commissions,etc. These expenses cannot exceed the total income generatedincluded on line 1 for each category of interest.

Line 3 – Interests received from financial institutions engaged intrade or business in Puerto Rico are exempt up to $100 or $200for married taxpayers. This exemption will be claimed in ColumnB, C, D or E of this line. The total amount of the sum of all columnson this line should not exceed $100 or $200 for marriedtaxpayers. In the case of married taxpayers filing separately orif the optional computation of tax is chosen, the exemption cannotexceed $100 for each one.

Line 4 – Determine the amount of taxable interests for eachcategory by subtracting the total expenses (line 2) and theexemption (line 3) if applicable. Net interest income in ColumnsA through C, E and F will be transferred to lines 4(b) through4(e) and 4(k), as applicable, of Schedule A2 Individual todetermine the tax at the corresponding preferential rate.

Line 5 - Add the total net interest of each Column of line 4,including interests subject to preferential rates, and transfer it toPart 1, line 2C of the return or Part I, line 3C, Columns B and Cof Schedule CO Individual.PART II - CORPORATE DIVIDENDS

Enter in the indicated spaces, the payer’s name and employeridentification number, and the account number.

Column A – It must be reflected in this column dividends subjectto a 15% withholding. Every eligible distribution made by adomestic or foreign corporation, which income from sourceswithin Puerto Rico is at least 80% of its gross income derivedduring the last 3 taxable years prior to the date in which thedividend is declared, is subject to a 15% preferential rate. Ifyou have an investment in stocks in a domestic corporation, a15% withholding will be made automatically on any distributionmade, unless you elect that such withholding be inapplicable.

This information comes from Box 2 of Form 480.6B (InformativeReturn – Other Income Subject to Withholding). Provide withthe return the required information of this form.

If you elected that no withholding be made, you must informsuch income as ordinary income and pay taxes at the regularrates. This income must be informed in Column D and providewith the return the required information from Box 5 of Form480.6A (Informative Return - Other Income Not Subject toWithholding).

Also include in this Column the information from line 1I, Part IIIof Form 480.60 F and line 8, Part III of Form 480.60 EC, ifapplicable.

Columns B and C – Enter in these Columns any dividenddistribution under the provisions of special legislation thatprovides a preferential rate different to 15%. Enter in the spaceprovided the applicable preferential rate. Provide the requiredinformation from Box 3 of Form 480.6B.

Also include in this Columns the information from line 1J, Part IIIof Form 480.60 F and line 9, Part III of Form 480.60 EC, asapplicable.

Column D – Enter any dividend distribution received from aforeign corporation not engaged in trade or business in PuertoRico, or which income is substantially from sources outsidePuerto Rico. Provide the required information from Box 5 ofForm 480.6A.

You must also include in this Column the information from line1K, Part III of Form 480.60 F and line 9, Part III of Form 480.60EC if a percentage in ___% is not included, as applicable.

If you receive federal informative returns of income subject totax in Puerto Rico (i.e. Form 1099-DIV or Federal K-1), youmust enter in this Column D the amounts of dividends that areincluded in said forms.

Line 1- Transfer the result of the sum of Columns A to D to theline of (Total $______) that is included on line 2D, Part 1 ofpage 2 of the return or to Part I, line 3D of Schedule COIndividual, as applicable.

Line 2 – Include on this line according to each category ofdividends, the ordinary and necessary expenses paid orincurred to generate them such as bank charges, brokeragecommissions, etc. These expenses cannot exceed the totalincome included on line 1 for each category of dividends.

Line 3 – Determine the amount of taxable dividends for eachcategory by subtracting the expenses (line 2) from the total

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(line 1). The net dividend income from Columns A, B and C willbe transferred to line 4(f) of Schedule A2 Individual to determinethe tax at the corresponding preferential rate.

Line 4 – Add the total net dividend for each Column of line 3,including dividends subject to preferential rates, and transferthe same to Part 1, line 2D of the return or to Part I, line 3D,Columns B and C of Schedule CO Individual, as applicable.

PART III - MISCELLANEOUS INCOME

Column A - Enter those miscellaneous income not itemized inany part of the return or schedules. If you choose theoptional computation of tax, these income not itemizedwill be attributed on a 50% basis to each spouse.

Column B - You must inform the income received from prizesor contests. If the prize consists of a property, equipment orother value, you must inform its fair market value. If you choosethe optional computation of tax, this income must beattributed on a 50% basis to each spouse.

Line 1- Transfer the result of the sum of Columns A and B to theline of (Total $______) that is included on line 2G, Part 1 ofpage 2 of the return or to Part I, line 3G of Schedule COIndividual, as applicable.

Line 2 - Include on this line according to each income categoryof Columns A and B, the ordinary and necessary expensespaid or incurred to generate them such as bank charges,brokerage commissions, fees, etc. These expenses cannotexceed the total income included on line 1 for each incomecategory.

Line 3 - Determine the amount of taxable income for eachcategory by subtracting the expenses (line 2) from the total(line 1).

Line 4 – Add the subtotal of Columns A and B of line 3. Transferthis amount to Part 1, line 2G of the return or to Part I, line 3G ofSchedule CO Individual, Columns B and C, as applicable.

SCHEDULE F1 INDIVIDUAL – DETAIL OF INCOMEOF RESIDENT INDIVIDUAL INVESTORS

Use this Schedule to inform passive income from interests,dividends and long-term capital gains earned by a residentindividual investor with respect to his/her investments. Suchexemption will be in effect until December 31, 2035.

For purposes of Act 22-2012, as amended, or Act 60-2019, asamended, “resident individual investor” means a residentindividual, as defined in Section 1010.01(a)(30) of the Code,who was not a resident of Puerto Rico between January 17,2006 and January 17, 2012 and who becomes resident ofPuerto Rico no later than the taxable year ending on December31, 2035.

You should indicate the tax exemption grant numberissued by the Department of Economic Developmentand Commerce and the date on which you establishedyour residence in Puerto Rico. You must have answered"Yes" in Question E of the Questionnaire on page 1 ofthe return.

PARTS I AND II – INTERESTS AND DIVIDENDS

Describe the name of the person who made the payment,employer identification number of said person, the accountnumber and the amount received.

It will be totally exempt from the payment of income tax in PuertoRico, including the alternate basic tax, the income from all sourcesearned by a resident individual investor, after becoming residentof Puerto Rico but before January 1, 2036, consisting of:

• interests and dividends, including but not limited to, interestsand dividends from a registered investment companydescribed in Section 1112.01 of the Code, and

• interests, financing charges, dividends or share inpartnerships benefits received from international bankingentities duly authorized according to the Banking CenterRegulatory Act.

Transfer the total of line 1, Parts I and II to Schedule IE Individual,Part II, line 36.

PART III – CAPITAL ASSETS GAINS AND LOSSES

You must inform in this part the long-term capital gains andlosses derived from:

Accretion before becoming resident of Puerto Rico

The part of the net long-term capital gain derived by a residentindividual investor related to any accretion in securities ownedbefore he/she became resident of Puerto Rico, that is recognizedafter 10 years of becoming resident of Puerto Rico and beforeJanuary 1, 2036, will be subject to the payment of a 5% tax, inlieu of any other tax provided by the Code, including alternatebasic tax. If such accretion is recognized at any other moment,the net long-term capital gain related to such securities, shall besubject to the payment of income tax according to the tax treatmentprovided by the Code. The amount of this net long-term capitalgain shall be limited to the share of the gain related to the accretionof the securities while the resident individual investor was livingoutside of Puerto Rico. Provided that, for taxable years beginningafter December 31, 2016, said capital gain will be consideredincome from sources outside of Puerto Rico for purposes of theincome tax provided in the Code.

Accretion after becoming resident of Puerto Rico

The total net capital gain derived by a resident individual investorrelated to any accretion of the securities owned after he/shebecame resident of Puerto Rico, that is recognized before January1, 2036, will be totally exempt from the payment of income tax inPuerto Rico, including the alternate basic tax provided by theCode. If such accretion is recognized after December 31, 2035,the net long-term capital gain related to such securities will besubject to the payment of income tax according to the tax treatmentprovided by the Code. The amount of this net long-term capitalgain is in relation to the share of the gain related to the accretionof the securities, including the securities owned by the residentindividual investor at the moment of becoming resident of PuertoRico as well as the ones that he/she acquires after becomingresident of Puerto Rico.

You must indicate the sale price and the adjusted basis of thecapital asset sales transactions included in this Part III, in ColumnsA and C, respectively. In addition, in those cases in which thesale of capital assets included in this part correspond to securitiesthat the resident investor owned at the moment of becomingresident of Puerto Rico, the market value of said securities atthe date of establishing residence in Puerto Rico shall beindicated in Column B.

Transfer the total of line 1, Column (E) to Schedule D Individual,Part II, line 15. Transfer the total of line 1, Column (F) to ScheduleIE Individual, Part II, line 36. For additional information refer toAct 22-2012, as amended, or Act 60-2019, as amended.

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SCHEDULE G INDIVIDUAL - SALE OR EXCHANGEOF ALL TRADE OR BUSINESS ASSETS OF A SOLEPROPRIETORSHIP BUSINESS

Every individual who sells, exchanges or disposes all the assetsused in his/her sole proprietorship business, may defer the gain if:

1) Reinvests the product of the sale or exchange in anothersole proprietorship business in Puerto Rico.

2) Makes the reinvestment within 12 months from the date ofthe sale or exchange of the first business.

This gain deferment will not apply to businessesconducted by corporations or partnerships, or othertype of organizations.Definitions:

Sole proprietorship business - Any business engaged inmanufacture, agriculture, construction, sale and purchase ofconsumer’s goods or to render services, which are totallyowned by a natural person.

Assets used in your sole proprietorship business – Itincludes land, real and personal property subject to theconcession of depreciation, property included on the taxpayer’sinventory in existence at the end of the taxable year, propertyowned for the sale during the ordinary course of industry orbusiness, sales or payable promissory notes and otherintangible property. The term does not include property forpersonal use, property owned as investment and property thatis not used in your sole proprietorship business.

PART I - QUESTIONNAIRE

You must indicate on line 1 if in previous years you haveclaimed the benefit of postponing the gain of a sole proprietorshipbusiness, by selecting the corresponding oval. In case youhave answered “Yes”, you must inform in the spacesindicated, the taxable year in which you commenced to postponethe gain and the amount claimed.

The adjusted basis to be informed on line 2 will be equal tothe amount determined on Schedule G Individual, Part III,line 21 for the taxable year in which you elected to benefitfrom the gain postposition.

This Schedule must include the aforesaid informationand will be submitted with your return for all subsequentyears in which you elected to benefit from the postpositionof the gain from a sole proprietorship business.

PART II - COMPUTATION OF GAIN (OR LOSS)

Line 7 - You must inform those expenses incurred that madepossible the sale of your first sole proprietorship business. Thefollowing examples are considered these type of expenses:advertisements, legal fees, commissions, etc.

Line 9 - The adjusted basis of your first sole proprietorshipbusiness will be its cost, increased by the permanentimprovements made to the business and reduced by thedepreciation expense claimed over the business assets used.

However, the adjusted basis of the property must be increasedby those taxpayers that during the periods comprised betweenJuly 1 and December 31, 2006 and/or between July 1, 2014and April 30, 2015 prepaid the 5% and/or 8% special tax,respectively, on the increase in accumulated value of capitalassets. In this case, the adjusted basis of the property willinclude the increase in accumulated value upon which thespecial tax was paid. To indicate this adjustment to the basis,select the corresponding oval.

Line 10 – Enter the gain realized on the sale. If the gain wasrealized on the sale of a qualified property under the provisionsof Act 132-2010 or Act 216-2011, the same is 50% exempt fromthe payment of income tax. For the definition of qualified propertyrefer to the instructions of Schedule D Individual.

Line 12 - If you sold your first sole proprietorship business andhave the intention of purchasing another new sole proprietorshipbusiness, the Code provides you the benefit to postpone therealized gain as long as you comply with the requirementspreviously mentioned. Do not complete the rest of the Scheduleand submit it with your return. You must fill out anotherSchedule G Individual for next year to inform thepostponed gain and the adjusted basis of the new soleproprietorship business.

PART III - ADJUSTED SALES PRICE, TAXABLE GAIN ANDADJUSTED BASIS OF NEW SOLE PROPRIETORSHIPBUSINESS

Line 13 - Enter on this line the total amount realized on the saleof your first sole proprietorship business as determined on line10. Indicate if it is a short-term or long-term gain, by selectingthe corresponding oval.

If this line is zero, then there is no gain to be recognized for thistaxable year. In this case, do not complete the rest of the formand include the same with the return.

If this line is more than zero and you acquired a new soleproprietorship business, continue with the rest of the form inorder to determine if any part of this realized gain will be taxedin this taxable year. This occurs when the assets sales price ofyour first sole proprietorship business exceeds the purchasecost of the new sole proprietorship business.

On the other hand, if this line is more than zero and you do nothave the intention of buying another business during thereplacement period provided by the Code, all realized gain, asdetermined on line 10 of this schedule, will be recognized andtaxed in this taxable year. However, if you select the oval online 10 indicating “Qualified property: 1 Yes”, transfer toSchedule D Individual, as applicable, the 50% of the amountshown on this line.

Line 14 - To determine which part of the realized gain is taxable,the sale price of the first sole proprietorship business will includeonly the amount of any mortgage, fiduciary cession for thebenefit of creditors (trust deed), or any other debt to which issubject such property owned by the purchaser. In this case,the commissions and other selling expenses paid or incurredon the sale of the first sole proprietorship business will not bededucted nor taken into consideration while determining thesale price.

Line 15(b) - The cost of the new sole proprietorship businesswill be its cost plus those debts to which the property is subject(including mortgages) as of the date of the purchase, and thenominal value of the taxpayer’s debts that are part of theconsideration for the purchase.

Line 19 - Enter the smaller of line 13 or 18. If the result is zeroor less, there will be no taxable gain for this taxable year.

If the amount is more than zero, this will be the taxable gain forthis taxable year. This occurs when the total amount reinvestedin the new sole proprietorship business is less than the saleprice of the first sole proprietorship business. If you selected theoval on line 10 indicating “Qualified property: 1 Yes”,transfer to Schedule D Individual, as applicable, the 50% of theamount shown on this line.

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Line 21 - This will be the adjusted basis of the new soleproprietorship business, which you must inform in all thesubsequent taxable years since you elected the benefitof postponing the gain. The same will be informedon Schedule G Individual, Part I, line 2 of the followingyear of said election.

This provision has the effect of postponing the gain not recognizedon the sale of the first sole proprietorship business until a sale ismade of all the assets of the new sole proprietorship business.

SCHEDULE H INDIVIDUAL - INCOME FROMANNUITIES OR PENSIONS RECEIVED IN THE FORMOF PERIODIC PAYMENTS

This Schedule must be completed if you received income fromannuities or pensions from qualified pension plans under Section1081.01 of the Code or granted by the Government of PuertoRico, the United States and instrumentalities or politicalsubdivisions of both governments.

Identify the concept of income providing the required informationor filling in the corresponding oval to indicate if you receive apension or annuity, who grants the pension, place where youprovided the service, the form in which the pension or annuityis reported, among others.

Schedule H Individual provides space to report the incomefrom only one annuity or pension. Therefore, in the case ofindividuals receiving more than one annuity or pension, aseparate schedule should be completed for each one.

If you receive benefits from the Social Security Administration,do not complete this Schedule because such benefits are nottaxable in Puerto Rico. On the other hand, if you receivedincome in periodic payments from the purchase of a fixed orvariable annuity through a financial or insurance institution,report it on this schedule. However, any other income that is notreceived as periodic payments from such annuity must beinformed on Schedule F Individual or Schedule D Individual,as applicable. Refer to the instructions of said schedules.

Pensions from governmental plans must be included on thisSchedule.

In the case of a pension, the name of the payer and employeridentification number must be included.

PART I - DETERMINATION OF COST TO BE RECOVEREDOF THE PENSION OR ANNUITY

Complete this part only if you have not recovered the cost of thepension or annuity. If you already have recovered the cost ofyour pension or annuity, do not fill out this Part and continuewith Part II of the Schedule.

Line 1 - Enter the cost of the pension or annuity. As a generalrule, the cost of the pension or annuity is the amount that thetaxpayer paid in order to be entitled to receive the annuity orpension. In the case of contributions to a qualified pension planunder Section 1081.01 of the Code, the cost of the pensionincludes after-tax contributions. Also, include those amountsover which you prepaid the 5% special tax under Sections1081.01(b)(9) of the Code or Section 1012D of the 1994 Codeand the 8% under Section 1023.21 of the Code.

As a general rule, this information comes from Box 3 of Form480.7C (Informative Return – Retirement Plans and Annuities).In the case of pensions paid by retirement systems subsidized

by the federal government, its instrumentalities or politicalsubdivisions, said information will be obtained from a Form1099-R.You must provide the required information of the formwith your return.

Line 2 - Breakdown the amount of pension or annuity receivedin each of the previous years and totalize the amounts in theboxed area.

Line 3(a) - Breakdown the amount of taxable pension or annuityreceived in each of the previous years and totalize the amounts in theboxed area.

Line 3(b) - Breakdown the amount of tax exempt pensionreceived in each of the previous years and totalize the amountsin the boxed area.

PART II - TAXABLE INCOME

Line 7 - Enter the total amount received from annuities orpensions during the year. This information appears on Form480.7C, Box 17. In the case of pensions paid by retirementsystems subsidized by the federal government, itsinstrumentalities or political subdivisions, said information will beobtained from a Form 1099-R.

Line 8 - Enter $11,000 if you are under age 60, or enter$15,000 if you are age 60 or older.

This deduction only applies if the pension received isderived from a qualified pension plan under Section1081.01 of the Code or from the retirement systemssubsidized by the Government of Puerto Rico, the UnitedStates and instrumentalities or political subdivisionsof both governments.

For these purposes, Form 480.7C must indicate the followinginformation:

• that the distribution is made in periodic payments,• that it is a governmental or private qualified plan,• that no amount must be reflected in Boxes 6 through 15, and• that the distribution code in Box 23 must be one of the

following: A, B,C, D or L.

If the taxpayer receives more than one pension, the exemptionwill apply for each pension separately.

If the total amount received during the year exceeds $11,000or $15,000, as applicable, the excess over such amount will besubject to tax. While you are recovering the cost of the annuityor pension, you will be taxed up to 3% of such cost.

If you claim the exempt amount of $15,000, you mustkeep for your records a copy of your birth or baptismcertificate as evidence to support your right to claimthe exemption. Make sure to write your date of birth onpage 1 of the tax return.

Line 12 - Enter the amount of line 11 or 3% of the annuity’scost, whichever is greater, until you have recovered the totalcost of your annuity or pension tax free. This amount cannot begreater than the amount on line 9.

If the payments received covered less than 12 months, multiply1/12th from the 3% of the pension cost (line 1) by the numberof months during which the pension was received. Enter online 12 of this Schedule and in Part 1, line 2H of the return, theamount determined from the above computation, or the amountentered on line 11 of this Schedule, whichever is greater, but

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not greater than the amount of line 9. If you choose the optionalcomputation of tax, transfer this amount to Schedule COIndividual, Part I, line 3H, Column B or C, as applicable,corresponding to the taxpayer or his/her spouse.

Line 13 - Enter the income tax withheld, if any, and transfer thisamount to Schedule B Individual, Part III, line 18.

Provide the required information of Form 480.7C andthis Schedule.

SCHEDULE IE INDIVIDUAL – EXCLUDED ANDEXEMPT INCOME

Complete this Schedule to inform the excluded and exemptincome received during the taxable year. The total amount ofexclusions and exemptions of gross income will be consideredin the calculation of the limitation of 30% of income for mortgageinterests deduction. Also, this schedule will be used to determinethe excluded and exempt income subject to alternate basic tax.

In the case of married taxpayers filing jointly, they shall completeand submit with the return a Schedule IE Individual for eachspouse. Select the oval that identifies the taxpayer or the spouse,respectively.

PART I – EXCLUSIONS FROM GROSS INCOME

Line 1 – Enter the income received under a life insurancecontract whether in lump-sum or in installments, by reason ofdeath or terminal illness of the policy holder. In the case ofpayments for terminal illness, previous authorization from theSecretary is required to claim the exemption and the policyholder should have less than a year of life expectancy. Formore information, see Section 1031.01(b)(1) of the Code.

Line 2 – Enter the value of property acquired through donation,legacy or inheritance. The income derived from such propertyis not considered excluded and therefore, should be includedas gross income. If the donation, legacy or inheritance is paid ininstallments, include as income the portion that is considered tobe derived from the property. (Section 1031.01(b)(2) of theCode).

Line 3 – Enter the amounts received through medical or accidentinsurance, under labor compensation acts, judicial or extrajudicial indemnifications and amounts received through pensions,annuities or analog concessions for personal physical injuryor physical illnesses or by reason of occupational or nonoccupational disability.

Line 5 – Enter the income derived from the discharge of debts,in whole or in part, if the discharge is done under one of thefollowing circumstances:

• bankruptcy under Title 11 of the Code of the United Statesof America approved by a court with competent jurisdiction;

• taxpayer insolvency (liabilities exceed the fair market valueof the assets);

• the debt is from a student loan which terms allow fordischarge in exchange for work for a period of time incertain professions or with specific employers; or

• the debt discharged is the product of a reorganization of amortgage loan guaranteed by a qualified residence of thetaxpayer, as provided in Section 1033.15(a)(1)(D) of theCode, and which is located in Puerto Rico. For purposes ofthis subsection the original mortgage loan debt cannotexceed one million (1,000,000) dollars.

If the debt discharge is not due to one of the precedingcircumstances, the income derived from the same is consideredtaxable income and shall be included on Schedule F Individual.

The excluded amount of income for debt discharge will reducethe net operating loss incurred or available in the year of thedischarge, the net capital loss incurred or available in the yearof the discharge, the tax basis of any asset that constitutes thecollateral of the debt subject to discharge, or the tax basis of anyother asset in the hands of the taxpayer, in that order.

Provide the information of Box 19 of the Informative Return -Exempt and Excluded Income and Exempt Income Subject toAlternate Basic Tax (Form 480.6D).

Line 6 – Enter the income received for child support. Do notinclude on this line payments received from alimony due todivorce or separation provided under Section 1033.13 of theCode. If you received payment from alimony due to divorce orseparation, enter it on line 2(N), Part 1 of the return.

Line 7 - Enter the amount of compensation or indemnificationpaid for dismissal, pursuant to Section 1031.01(b)(15) of theCode (that is, compensations or indemnities paid to an employeedue to dismissal, without the need to determine their just cause,up to a maximum amount equivalent to the compensation thatthe employee could receive under Act No. 80 of May 30, 1976,as amended). This amount includes any equivalent voluntarypayment that was paid by the employer to the employee becauseof the dismissal, regardless of whether the payment is made atthe time of the dismissal or subsequently, or is made by reasonof a transaction agreement or by virtue of a court ruling oradministrative order. Provide the required information of theWithholding Statement (Form 499R-2/W-2PR), Box for ExemptSalaries, Code I.

Line 8 - Enter the amount received as compensation, paymentsor distributions received due to a disaster declared by theGovernor of Puerto Rico that have been reported in awithholding statement or informative return. The amount receivedmust be made to provide assistance and support in the processof repairing, mitigate or compensate any damage or loss sufferedas consequence of a disaster. Provide the required informationof the Withholding Statement (Form 499R-2 / W-2PR), Box 16,17 or 18 that includes Code G; of the Informative Return -Exempt and Excluded Income and Exempt Income Subject toAlternate Basic Tax (Form 480.6D), or the amount reported onSchedule F Individual, Part VI, line 4, as applicable.

Line 9 - Enter the amount received as compensation, paymentsor distributions received due to a disaster declared by theGovernor of Puerto Rico that have not been reported in awithholding statement or informative return. The amount receivedmust be made to provide assistance and support in the processof repairing, mitigate or compensate any damage or loss sufferedas consequence of a disaster. In this case, the taxpayer mustinclude with the return a detail in which the origin of thecompensation, payment or distribution received is broken down.

Line 10 - Enter the amount received for any subsidy or stimuluspaid by the Federal Government because of COVID-19. Includea breakdown with a description of the Federal Government aidprogram that allowed the access to this benefit, the amount ofthe payment and any other required information.

Line 11 - Enter the amount received for any subsidy or stimuluspaid by the Government of Puerto Rico because of COVID-19.Include a breakdown with a description of the aid program from theGovernment of Puerto Rico, either at the central or municipal level,the amount of the payment and any other required information.

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Line 12 - Enter the total amount received for interest uponmortgages over residential property located in Puerto Ricogranted after January 1, 2014 (including mortgages that arefrom new construction and that have been grantedcontemporaneously with the first transmission of the propertymortgaged to a new owner) and secured or guaranteed by theNational Housing Act of 1934 or the Servicemen's ReadjustmentAct of 1944.

Line 13 – Enter the total amount of other exclusions from grossincome for which a specific line is not provided on this Schedule,such as study scholarships, literary, scientific, artistic or otherawards. Also, enter amounts excluded from gross income underspecial laws.

An example of the special laws is the income derived from mealor trip allowances paid for voluntary services under theVoluntary Act of Puerto Rico (Act 261-2004). This amount shallnot exceed $1,500. Any excess over such amount is includedas taxable income.

Enter the amount in the column of items considered for themortgage interests limitation as well as in the column of itemssubject to alternate basic tax.

The taxpayer must include with the return a schedule detailingthe type of exclusion from net income and the amount of saidincome received during the taxable year.

If you choose the optional computation of tax, indicate on lines1 through 11 the total amount received by each spouse in his/her individual capacity. Enter on line 12 the amount of incomereceived on a 50% basis for each spouse. On the other hand,indicate on line 13 the total amount received by each spouse inhis/her individual capacity or on a 50% basis, as applicable.

PART II - EXEMPTIONS FROM GROSS INCOME

Line 2(C) – Enter the interest income received from any of thefollowing mortgages:

• secured by the National Housing Act of 1934, as amended,that have been issued no later than February 15, 1973and owned by residents of Puerto Rico on May 5, 1973and issued within the 180 days following February 15,1973 to be acquired by a resident of Puerto Rico;

• on residential property located in Puerto Rico issued afterJune 30, 1983 and before August 1, 1997, secured by theNational Housing Act of 1934 or the Servicemen’sReadjustment Act of 1944;

• on new construction residential property located in PuertoRico issued after July 31, 1997 and secured by the NationalHousing Act of 1934 or the Servicemen’s Readjustment Actof 1944;

• originated to provide permanent financing for theconstruction or acquisition of social interest housing; and

• secured under the Bankhead-Jones Farm Tenant Act of1937, as amended.

Enter the amount in the column of items considered for themortgage interest limitation as well as in the column of itemssubject to alternate basic tax.

Provide the required information from Box 8 of Form 480.6D.

Line 2(D) - Enter the amount claimed as an exclusion up to$100 for interests received from deposit in accounts in PuertoRico. Transfer to this line the amount entered on Schedule FFIndividual, Part I, line 3. Enter the amount in the column of itemsconsidered for the mortgage interest limitation as well as in thecolumn of items subject to alternate basic tax.

Line 2(E) - Enter the amount of interest received on bonds,notes or other obligations of an exempt business for thedevelopment, construction or rehabilitation of, or improvementsto an exempt business, as defined in Section 6070.55 of Act 60-2019, as amended, conditioned on that the funds being totallyused for development, construction, or rehabilitation of, orimprovements to an exempt business and / or to the payment ofexisting debts of said exempt business, as long as the fundsfrom those existing debts have been used originally fordevelopment, construction or rehabilitation of, or improvementsto said exempt business.

Provide the required information from Box 9 of Form 480.6D.

Line 2(F) – Enter the total amount of other interests subject toalternate basic tax reported in Box 10 of Form 480.6D.

Enter the amount in the column of items considered for themortgage interest limitation as well as in the column of itemssubject to alternate basic tax. Provide the required informationof Form 480.6D.

Line 2(G) – Enter the total amount of other interests not subjectto alternate basic tax reported in Box 11 of Form 480.6D.Provide the required information of Form 480.6D.

Line 2(H) – Enter the total amount of other interests subject toalternate basic tax not reported on Form 480.6D.

The taxpayer must include with the return a schedule detailingthe payer’s name and employer identification number, accountnumber (if applicable) and the amount of interests receivedduring the year that are subject to the payment of alternatebasic tax and were not reported on a Form 480.6D.

Enter the amount in the column of items considered for themortgage interest limitation as well as in the column of itemssubject to alternate basic tax.

Line 2(I) – Enter the total amount of other interests not subjectto alternate basic tax and not reported on a Form 480.6D.

The taxpayer must include with the return a schedule detailingthe payer’s name and employer identification number, accountnumber (if applicable) and the amount of interests receivedduring the year that are not subject to the payment of alternatebasic tax and were not reported on a Form 480.6D.

Line 3(A) - Enter the distributions of dividends reported inBoxes 12 and 17 of Form 480.6D which are subject to alternatebasic tax. Enter the amount in the column of items consideredfor the mortgage interest limitation as well as in the column ofitems subject to alternate basic tax. Provide the requiredinformation of Form 480.6D.

Line 3(B) - Enter the dividend distributions reported in Boxes13, 14, 15, 16 and 18 of Form 480.6D. Enter the amount onlyin the column of items considered for the mortgage interestlimitation. Provide the required information of Form 480.6D.

Line 3(C) – Enter dividends that were not reported on Form480.6D and that are subject to the payment of alternate basictax.

The taxpayer must include with the return a schedule detailingthe payer’s name and employer identification number, accountnumber (if applicable) and the amount of dividends receivedduring the year that are subject to the payment of alternatebasic tax and were not reported on a Form 480.6D.

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Enter the amount in the column of items considered for themortgage interest limitation as well as in the column of itemssubject to alternate basic tax.

Line 3(D) - Enter dividend distributions not reported on Form480.6D and not subject to the payment of alternate basic tax.

The taxpayer must include with the return a schedule detailingthe payer’s name and employer identification number, accountnumber (if applicable) and the amount of dividends receivedduring the year that are not subject to the payment of alternatebasic tax and were not reported on a Form 480.6D.

Line 4 - Enter the fair rental value of housing and its belongings,and the amount of any payments for water, electricity, gas andtelephone provided to a priest or minister of any religion properlyordained, as part of their compensation. The expenses may notbe sumptuous or extravagant, as determined by the Secretary.

Line 5 - Enter the total amount received from exempt interestreported in Box 12(C) of Form 480.7 or in Box 8(B)(2) of Form480.7B, as applicable. Provide the required information of thecorresponding form.

Line 6 - Enter the amount of remuneration received as a physicianduring the internship period under a contract with the Departmentof Health of Puerto Rico or with any municipality or politicalsubdivision of the same for medical training through practice at ahospital. The exemption applies to remuneration in the form of amonthly allowance and the additional allowance for the cost ofhousing and meals for a maximum period of 72 months. Providethe required information of Form 499R-2/W-2PR.

Line 7 - Enter the amount of income received by a Puerto RicoPolice member for the overtime worked, as provided in Act 58-2013. This officer is defined in Article 2 of Act 53-1996, asamended (Puerto Rico Police Act of 1996). Provide the requiredinformation of Form 499R-2/W-2PR.

Line 8 - Enter the amount of wages received by publicemployees for overtime work in emergency situations underAct 324-2004. Provide the required information of Form499R-2/W-2PR. Enter the amount in the column of itemsconsidered for the mortgage interest limitation as well as inthe column of items subject to alternate basic tax.

Line 9 - Enter the amount received by an eligible researcheror scientist for services rendered to a superior level educationalinstitution to perform eligible scientific research as provided inSection 1031.02(a)(26) of the Code and the regulations issuedthereunder. Enter also the compensation received by an eligibleresearcher or scientist for services rendered in the Districtestablished under Article 7 of Act 214-2004, as amended. Formore information, refer to Section 1031.02(a)(27) of the Code.

The taxpayer must keep for his/her records the Certificationissued by the Department granting the exemption.

Line 10 - Enter the amount paid by an employer to an employeeas a reimbursement for expenses related to trips, meals, lodging,entertainment (not sumptuous or extravagant) and otherexpenses related to the employment, provided thereimbursement was done pursuant to a reimbursement planestablished by the employer that complies with the requirementsestablished by the Secretary.

Line 11 - Enter the amount of Cost of Living Allowance (COLA)received by employees of the Government of the United Statesof America who work in Puerto Rico up to the amount that isexempt from the income tax imposed by the Federal Internal

Revenue Code (Section 1031.02(a)(18) of the Code). Thisexemption may be denied if the taxpayer has not complied withhis/her tax obligations for the 4 years prior to the year in whichthe exemption is claimed. Transfer to this line the amountindicated in the “Wage and Tax Statement - Form W-2” (FederalForm W-2) provided by the Federal Government.

Line 12 – Enter the amount received for compensation foractive military service rendered by military personnel in a combatzone. This exemption does not apply to military personneltransferred outside Puerto Rico to relieve other personnel thatwas sent to the combat zone. For more information, see Section1031.02(a)(20) of the Code. Include Federal Form W-2.

Line 13 - Enter the amount received for the recapture of bad debts,prior taxes, surcharges, and other amounts. For more information,see Section 1031.02(a)(8) of the Code. Enter the amount in thecolumn of items considered for the mortgage interest limitation as wellas in the column of items subject to alternate basic tax.

Line 15 - Enter the exemption of $11,000 or $15,000 on theincome received from pensions and annuities, up to the limitestablished in Section 1031.02(a)(13) of the Code according toage. Transfer to this line the amount entered on Schedule HIndividual, Part II, line 8. If you received more than one pensionor annuity, add all the exemptions claimed on that line of eachSchedule H Individual and enter the total amount on this line.

Line 16 - Enter amount received by as pensioner of theEmployees' Retirement System of the Government of PuertoRico and its Instrumentalities, the Retirement Systems of theJudiciary and the University of Puerto Rico, and the pensionersof the Teachers' Pension and Annuity System with respect to theChristmas Bonus, the Summer Bonus granted by Act 37-2001and Act 38-2001, and the Medicine Bonus granted by Act 155-2003 and Act 162- 2003.

Line 17 - Enter the amount of the gain on the sale or exchangeof the principal residence by certain individuals, from qualifiedproperty and from eligible housing. For more information, referto Act 216-2011, Regulation No. 8127 of December 23, 2011and Act 303-2012. Transfer to this line the amount entered onSchedule D1 Individual, line 8 or the amount entered on ScheduleD3 Individual, line 14, as applicable.

Line 18 - Enter the amount received for unemploymentcompensation under an act of the United States, a state of theUnion or the Government of Puerto Rico. Enter the amount inthe column of items considered for the mortgage interest limitation.

Line 19 – Enter the compensation received that was paid by aforeign natural or juridical person to citizens and nonresidentaliens in Puerto Rico for technical services rendered during therealization of cinematographic productions for distribution to movieor television studios.

Line 20 – Enter the income from sources outside of PuertoRico received by a United States citizen nonresident of PuertoRico during the entire taxable year or the amounts attributed tothe period of non residency of an individual that changes his orher residence to Puerto Rico during the taxable year.Deductions attributable to exempt income will not be allowed.

Transfer to this line the amount included in question C of theQuestionnaire on page 1 of the return.

Line 21 – Enter the amount of remuneration received byemployees of foreign governments or internationalorganizations. For more information, refer to Section1031.02(a)(35)(E) of the Code.

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Line 22 – Enter the income received from buildings rented tothe Government of Puerto Rico for public hospitals, health orconvalescent homes, and public schools, solely and exclusivelyif they had a valid rental contract in force on or before November22, 2010. Include Schedule N Individual and select in Part I ofsaid schedule the oval that identifies the tax benefit under Section1031.02(a)(35)(F) of the Code.

Line 23 – Enter the income derived by the taxpayer from theresale of personal property or services which acquisition bythe taxpayer was subject to tax under Section 3070.01 of theCode or Section 2101 of the 1994 Code.

Line 24 – Enter the amount of accumulated gain from nonqualified options to acquire stocks over which the taxpayer hasprepaid the tax. (See Section 1040.08(e)(1)(A) and1023.21(c)(i) of the Code). Provide the required information ofForm 480.6D.

Line 25 – Enter the distributions of amounts previously notifiedas deemed eligible distributions under Sections 1023.06(j) and1023.25(b) of the Code. Provide the required information ofForm 480.6D.

Line 26 – Enter the amount of distributions from Non DeductibleIndividual Retirement Accounts. (See Section 1081.03 of theCode). Provide the required information of Form 480.6D.

Line 27 - Enter the amount received from certain exempt incomerelated to the operation of an employee's-owned specialcorporation, such as 90% of the rental payments for real andpersonal property used by the corporation in its development,organization, construction, establishment, or operation. For moreinformation refer to Section 1031.02(a)(17) of the Code. Enterthe amount in the column of items considered for the mortgageinterest limitation as well as in the column of items subject toalternate basic tax.

Line 28 – Enter the amount received for the distributable shareon exempt income from pass-through entities, and revocabletrusts or grantor trusts. Transfer to this line, in the column ofitems considered for the mortgage interest limitation, the amountindicated on Form 480.60 EC, Part III, line 17 and on Form480.60 F, Part III, line 1U, as applicable. Transfer to thecolumn of items subject to alternate basic tax, the amountindicated on Form 480.60 EC, Part III, line 18 and on Form480.60 F, Part III, line 1V, as applicable.

Line 29 - Enter the income from copyrights up to $10,000under the Puerto Rico Integral Development of the BookIndustry Incentives Act (Act 516-2004).

Line 30 - Enter the income received by designers andtranslators for their work in the preparation of books up to$6,000, under Act 516-2004.

Line 31 – Enter the amount received from salaries, servicesrendered and/or self-employment up to a maximum of $40,000if you are a young individual whose age fluctuates between 16and 26 years at the end of the taxable year.

On the other hand, if you are a young entrepreneur whoseage fluctuates between 16 and 35 years and you are in the firstthree years of operation of a new business under a specialagreement for the creation of young businesses, enter in thecorresponding line the amount of gross income generated bythe new business, up to $500,000. For more details, refer tothe provisions of Act 135-2014 (Act for the Incentives andFinancing of Young Entrepreneurs).

In order to claim the $500,000 deduction, you must include withthe return the Certification or copy of the Special Agreement forthe Creation of Young Businesses (Agreement) issued by thePuerto Rico Trade and Export Company. The exemption willbe applicable during the first 3 years from the signing of theAgreement. This document shall be filed through SURI.

Line 32 - Enter the amount of exempt wages received asprofessional in a hard-to-fill position as provided under Section2022.03(a) of the Incentives Code (Act 60-2019). These wagesare reported on the Withholding Statement (Form 499R-2/W-2PR), Box for Exempt Salaries, Code J.

Line 33 – Enter the amount included in Box 22 (Other PaymentsSubject to Alternate Basic Tax) of Form 480.6D, for which thereis not a specific line provided on this Schedule.

Line 34 - Enter the amount included in Box 23 (Other PaymentsNot Subject to Alternate Basic Tax) of Form 480.6D, for whichthere is not a specific line provided on this Schedule.

Line 35 – Enter the amount of other exempt income subject toalternate basic tax for which there is not a specific line providedon this Schedule and were not reported on a Form 480.6D.

The taxpayer must include with the return a schedule detailingthe payer’s name and employer identification number and theamount of income received during the year subject to thepayment of alternate basic tax that was not reported on a Form480.6D.

Line 36 – Enter the total amount of other exempt income notsubject to alternate basic tax for which there is not a specific lineprovided on this Schedule and were not reported on a Form480.6D. Racetrack winnings or income generated fromparticipants of the Caribbean Series are examples of the typeof exempt income that may be included on this line.

Also, enter on this line distributions of dividends or benefits fromindustrial development income of exempt business or fromexempt income of exempt hospital operations, or distributions inliquidation under Industrial Incentive Acts. For the treatment ofsuch current or liquidation distributions, see Internal RevenueCircular Letters No. 09-06 of July 22, 2009 and No. 12-07 ofOctober 10, 2012.

The taxpayer must include with the return a schedule detailingthe payer’s name and employer identification number and theamount of income received during the year not subject to thepayment of alternate basic tax that was not reported on a Form480.6D.

Line 37 - Enter the income from residential property rentedunder the Real Property Market Stimulus Act (Act 132-2010, asamended) reported in Schedule N Individual, Part II, line 2.Make sure to select oval 2 (Exempt amount under Act 132-2010) in said schedule.

Line 38 - Enter the exempt amount of manufacturing incomecovered under incentive acts, as determined in Part IV, line 4 ofSchedule J Individual. Make sure you have indicated in theschedule the incentives act which entitles you to this exemption.

Line 39 - Enter the exempt amount on income from the sale ofgoods covered under incentive acts, as determined in Part IV,line 4 of Schedule K Individual. Make sure you have indicated inthe schedule the incentives act which entitles you to this exemption.

Line 40 - Enter the exempt amount from farming income coveredunder incentive acts, as determined in Part IV, line 4 of Schedule

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L Individual. Make sure you have indicated in the schedule theincentives act which entitles you to this exemption.

Line 41 - Enter the exempt amount on income from servicesrendered covered under incentive acts, as determined in Part IV,line 4 of Schedule M Individual. Make sure you have indicated inthe schedule the incentives act which entitles you to this exemption.

Line 42 - Enter the exempt amount on income from the rent ofproperty covered under incentive acts, as determined in PartIV, line 4 of Schedule N Individual. Make sure you have indicatedin the schedule the incentives act which entitles you to thisexemption.

In the case of married taxpayers filing jointly, enter on lines 1, 4,through12, 15, 16, 18, 19, 21, 24, 26, 28 through 32 and 38through 42, the total amount received by each spouse in his orher individual capacity. Enter on lines 2, 3, 13, 14, 17, 22, 23,25, 27, and 37, the amount of income received per eachcategory on a 50% basis to each spouse. On the other hand,enter on lines 20 and 33 through 36 the total amount receivedby each spouse in his or her individual capacity or on a 50%basis to each one, as applicable.

PART III – TOTAL

Line 1 – Add line 14 of Part I and line 43 of Part II of the first column.This is the amount of excluded and exempt income that you willconsider for the 30% income limitation when you claim the deductionfor mortgage interests. You should complete and submit withyour return this Schedule to have the right to considerthis income for purposes of such deduction on ScheduleA Individual, Part I, line 1(i).

Line 2 – Add line 14 of Part I and line 43 of Part II of the secondcolumn. This is the total of excluded and exempt income subjectto alternate basic tax. Transfer this amount to Schedule OIndividual, Part I, line 11.

SCHEDULES J INDIVIDUAL, K INDIVIDUAL,L INDIVIDUAL, M INDIVIDUAL AND N INDIVIDUAL

Use these Schedules if you had income from:

1) Manufacturing Schedule J Individual

2) Sale of Goods Schedule K Individual

3) Farming Schedule L Individual

4) Services Rendered Schedule M Individual

5) Rent Schedule N Individual

Said Schedules provide spaces to inform only one sourceof income. Therefore, if you have more than one source ofincome, you must complete a separate schedule for eachone. You must also indicate in the provided space, if thereported income on such schedules constitutes yourprincipal industry or business.

Also, you must consolidate the gain or benefit determined inPart IV of the applicable schedules corresponding to the samesource of income and transfer the total amount to the applicableline on page 2, Part 1 of the return or to Part I, lines 3P through3T of Schedule CO Individual, if you choose the optionalcomputation of tax. For example, in case of a taxpayer whofiles a joint return with his spouse, and he is a lawyer and sheis a physician, they will use two Schedules M Individual todetermine the income and expenses for each one of theprofessions and then will transfer the sum of Part IV, line 5 ofsaid schedules to page 2, Part 1, line 2S of the return or Part I,

line 3S, Columns B and C of Schedule CO Individual, if youchoose the optional computation of tax.

If the taxpayer has a supermarket and a gas station, he or shewill use two Schedules K Individual to detail the income andexpenses and then will transfer the sum of Part IV, line 5 of saidschedules to page 2, Part 1, line 2 Q of the return or to Part I,line 3Q, Column B or C of Schedule CO Individual, if youchoose the optional computation of tax.

If you have two properties for rent, one for commercial use andother for residential purposes, you shall use two Schedules NIndividual to detail the income and expenses of each propertyand transfer the sum of Part IV, line 5 of such Schedule to page2, Part 1, line 2T of the return or to Part I, line 3T, Columns Band C of Schedule CO Individual, if you choose the optionalcomputation of tax.

Submit the Schedules you use with the return.

Audited Financial Statements:

Those taxpayers engaged in trade or business or engaged inthe production of income in Puerto Rico, shall be required tosubmit with the income tax return for taxable year 2020, auditedfinancial statements or an equivalent document, as it follows:

1. Individuals with business volume of less than $1 million

When the business volume during a taxable year is less than$1,000,000, the individual do not have the obligation to submitthe audited financial statements or equivalent document to thoserequired by Section 1061.15 of the Code. However, thetaxpayer may voluntarily submit, together with the filing of thereturn, one of the following documents to be able to claim in thereturn other deductions subject to validation for purposes of thealternate basic tax, as provided in Section 1021.02(a)(2) of theCode.

a. Agreed Upon Procedures Report ("AUP") preparedby a Certified Public Accountant ("CPA") with a licensein force in Puerto Rico under Internal Revenue CircularLetter No. 19-14 ("CC RI 19-14") related to the alternatebasic tax;

b. Schedule DDC Individual - Due Diligence Checklist byAccredited Agent-Tax Returns Specialist, provided bythe Department of the Treasury; or

c. Audited Financial Statements with an Auditor's Reportissued by a CPA licensed to practice in Puerto Ricounder Section 1061.15 of the Code (Audited FinancialStatements).

2. Individuals with business volume equal or greaterthan $1 million, but less than $3 million

When the business volume during a taxable year is equal orgreater than $1,000,000, but less than $3,000,000, the individualdoes not have the obligation to submit the Audited FinancialStatements. However, that individual who, together with thefiling of the return, voluntarily submit one of the followingdocuments, will not be subject to the limits on the deductionsestablished in Section 1021.02(a)(2) of the Code.

a. AUP prepared by a CPA with a license in force inPuerto Rico under CC RI 19-14;

b. AUP prepared by a CPA with a license in force inPuerto Rico under Internal Revenue Circular LetterNo. 20-39 (CC RI 20-39); or

c. Audited Financial Statements.

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In addition, every individual who is up to date with the taxresponsibility and under these conditions, choose to includethe Audited Financial Statements or the AUP under CC RI 20-39; will have the right to the Secretary relieve of being subject,total, or partially, to the withholding at source on paymentsreceived for services rendered.

3. Individuals with business volume equal or greaterthan $3 million, but less than $10 million

When the business volume during a taxable year is equal orgreater than $3,000,000, but less than $10,000,000, theindividual must submit, at his/her choice, Audited FinancialStatements or the AUP prepared by a CPA with a license inforce in Puerto Rico under CC RI 20-39.

4. Business volume greater than $10 million

When the business volume generated during a taxable year isgreater than $10,000,000, the taxpayer must have theobligation to submit with the return Audited Financial Statements.

Requirement of Audited Financial Statements to Groupsof Related Entities:

In the case of a group of related entities, as defined in Section1010.05 of the Code, composed of entities or natural personswho are engaged in trade or business in Puerto Rico, thefinancial statements required in points (2), (3) and (4) must besubmitted as consolidated or combined financial statements, inaccordance with provisions of the Generally AcceptedAccounting Principles in United States of America ("US GAAP").However, these consolidated or combined statements mustinclude a schedule showing in columns, the financial position,and results of operations of each of the affiliated entities thatmake up the group of related entities.

The Secretary may, through regulations, circular letter,administrative determination, or a general communication,establish those conditions that he deems necessary to exemptthe requirement to file consolidated or combined statementsand, instead, require financial statements separated by entity,as long as it is included in the notes to these financial statementsthe information of those related entities that are engaged intrade or business in Puerto Rico, and a schedule that presentsin columns, the financial statement and the results of operationsof each of the affiliates that make up the group of related entities.

However, every entities that have generated a business volumeequal to or greater than $1,000,000, and for the reason that thebusiness volume of the group of related entities to which theybelong is equal to or greater than $10,000,000 in the aggregate,may submit, instead of the consolidated or combined financialstatements, financial statements presenting financial position andresults of operations of said entity individually, as long as, thenotes to those financial statements includes a list of all the relatedentities that are engaged in trade or business in Puerto Rico.Such information must include the name of each of the personswho are part of the group of related entities that are engaged intrade or business in Puerto Rico.

Also, a person who is part of a group of related entities subjectto the provisions of the Section 1061.15 of the Code but that hasnot derived a business volume equal to or greater of $1 millionfor a taxable year, will not be required to submit Audited FinancialStatements for that year. However, said entity will be subject tothe requirement of the AUP pursuant to CC RI 20-39, if do notchoose to submit Audited Financial Statements.

For its part, every entity or natural person that is part of a groupof related entities and that according to the rules has the obligation

to file Audited Financial Statements, will be required to submitthe supplementary information described in Section 1061.15(b)of the Code.

Audited Financial Statements and Requirement ofSupplementary Information:

The Audited Financial Statements required by Section 1061.15of the Code, will include an income statement, a balance sheet,a cash flow, and a stockholders equity statement. They must besubmitted with an Auditor's Report issued by a CPA licensed topractice public accounting in Puerto Rico.

Said Auditor's Report shall indicate that the financial statementshave been submitted under the Auditing Standards GenerallyAccepted in the United States of America ("US GAAS"), withoutit being necessary, however, that the CPA issues a non-qualifiedopinion. Qualified opinions will be accepted, as defined by theUS GAAS, provided that the qualification of the opinion is notdue to restrictions on the scope of the audit imposed by thebusiness. Reports with abstention of opinion will not be accepteddue to restrictions on the scope of the audit imposed by thebusiness. Reports of adverse opinion shall not be accepted.

In addition, Section 1061.15(b) of the Code establishes therequirement to include additional information to the financialstatements that are submitted with this return. Every individualwho has to submit Audited Financial Statements along with hisor her return, will have the obligation to submit supplementaryinformation as described in Section 1061.15(b) of the Code.For additional information on the Guidelines for the Preparationof the Schedules Required as Supplementary Information,please refer to Administrative Determination No. 14-06 of March6, 2014 and Administrative Determination No. 15-24 ofDecember 17, 2015. The Supplementary Information must besubmitted no later than the last day of the month following thedue date to file the income tax return, including extensions.That is, an individual with a calendar year must file the returnon April 15, therefore, the due date to submit the SupplementaryInformation will be no later than May 31. If the individual requestsan extension of time to file the income tax return, the due date tosubmit said return will be October 15, therefore, in this case thedue date to submit the Supplementary Information will beNovember 30.

Business volume:

The term “business volume” means gross income as defined inSection 1031.01 of the Code, except that in the case of gains orincome described in Section 1031.01(a)(2)(A) of the Code, thetotal derived from the sale of goods or products shall be takeninto consideration without reducing the cost of such goods orproducts sold. The term business volume includes both, theamount of income reported on line 1, Part II of Schedules J, K,L, M and N Individual, and the business volume reported online 23, Part III of those Forms 480.60EC included in the return,in which the individual has a 50% or more participation.

For additional information on the requirements to file auditedfinancial statements, refer to Section 1061.15 of the Code. Foradditional information on the Agree Upon Procedure, refer toCC RI 19-14 related to the alternate basic tax, and to CC RI20-39 related to Audited Financial Statements.

If you received income from of a sole proprietorship derivedfrom manufacturing, sale of goods, agriculture, servicesrendered, rents or commissions, and your income from thesole proprietorship was $400 or more during the year, youmust file with the Internal Revenue Service (IRS) the U.S.Self-Employment Tax Return - Form 1040-SS.

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Form 1040-SS is used to inform the sole proprietorship incomeand to pay any tax due. Also, the Social Security Administrationuse the information included on Form 1040-SS to compute thesocial security benefits of the persons who work as a soleproprietorship. For additional information you can call the IRSat (1) (800) 829-1040.

PART I - QUESTIONNAIRE

Every taxpayer engaged in a trade or business must submitthe information requested in the questionnaire of Part I. Youmust include your employer identification number, assigned bythe Federal Internal Revenue Service (IRS) and theMerchant’s Registration Number assigned by theDepartment.

If you use more than one of the same schedule, indicate theamount in the space provided at the upper right part of SchedulesJ, K, L, M and N Individual (i.e. "Schedule J No. ___ of ___").

In the box for Location of Industry or Business, you must includethe address of the main office from which the industry or businessis carried-out. If you do not have a main office, you must includein this box the same country and state included in the mailingaddress on page 1 of the return.

In the nature of the business, provide a description of the activity,including the code(s) from the North American IndustryClassification System (NAICS) that appears on your Merchant'sRegistration Certificate. Also indicate the percentage that eachof the applicable NAICS codes included within each schedulerepresents from the total of each industry or business. Forexample, if the industry or business only has one applicableNAICS code, you must include 100% in the "Percentage____%" part. If more than one NAICS codes are applicable,you must submit a schedule detailing each applicable NAICScode with their corresponding percentage.

Indicate if you include with the return an audited financialstatement or an AUP, as applicable, and indicate the stampnumber from the CPA College of Puerto Rico of the CPA whomade them or a due diligence checklist form (Schedule DDCIndividual). If you are including with the return the AUP requiredunder Section 1061.15 of the Code, you must select the option(1) Audited Financial Statement. If on the contrary, you submitthe AUP to validate deductions on Section C, Part III for purposesof the alternate basic tax, select option (2) Agree UponProcedures Report ("AUP").

If you are engaged in a trade or business, and youroperations are covered by a tax exemption decree under ActNo. 26 of June 2, 1978 (Puerto Rico Industrial Incentives Act ),Act No. 52 of June 2, 1983 (Puerto Rico Tourism Incentives Actof 1983), Act No. 8 of January 24, 1987 (Puerto Rico TaxIncentives Act), Act 78-1993 (Puerto Rico Tourism DevelopmentAct), Act 225-1995 (Puerto Rico Agricultural Tax Incentives Act),Act 14-1996 (Special Act for the Development of Castañer), Act135-1997 (Tax Incentives Act of 1998), a Theatrical Businessoperating under Act 178-2000 (Act for the Creation of theTheatrical District of Santurce), Act 73-2008 (Economic Incentivesfor the Development of Puerto Rico Act), Act 74-2010 (PuertoRico Tourism Development Act of 2010), Act 83-2010 (PuertoRico Green Energy Incentives Act), Act 132-2010 (Real PropertyMarket Stimulus Act), Act 1-2013 (Jobs Now Act), Act 135-2014(Act for the Incentives and Financing to Young Entrepreneurs),or Act 14-2017 (Incentives Act for the Retention and Return ofMedical Professionals), Act 60-2019, as amended (Puerto RicoIncentives Code) or under Section 1031.02(a)(35)(F) of theCode, select the corresponding oval and indicate the case orconcession number, if applicable. In case of Act 1-2013, youmust include a copy of the Special Agreement for the Creation of

Jobs. On the other hand, in case of Act 135-2014, you mustinclude a copy of the Special Agreement for the Creation ofYoung Businesses (Agreement) with the Puerto Rico Tradeand Export Company, in order to enjoy the exemption for thefirst 3 years following the signature of the Agreement. If you arenot covered by a decree or resolution, you must select the ovalthat indicates “Fully Taxable”.

Income from a Film Entity derived directly from a Film Projector Infrastructure Project will be subject to a fixed income tax rateof 7%, in lieu of any other tax imposed by Law, if any. Formore details, refer to Act 60-2019, as amended.

Qualified Physicians who have a Decree under Act 14-2017 or Act 60-2019 will be subject, instead of any other taxprovided by the Code or any other act, to a fixed income taxrate of 4% on the eligible income generated from professionalmedical services rendered during the entire period of the Decreeapproved by the Secretary of Economic Development andCommerce of Puerto Rico.

If you elected to receive the tax benefits granted by the PuertoRico Agricultural Tax Incentives Act (Act 225-1995), as amended,you will have a 90% tax exemption on the agricultural netincome as long as you have derived at least 50% of the grossincome from agricultural activities, and submit with the return acopy of the current bona fide farmer certificate issued by theSecretary of Agriculture. In order for this exemption to begranted, you must select the applicable oval.

Expenses Related to Certain Concepts

Indicate in this part if you claimed expenses related to theownership, use, maintenance or depreciation of automobiles,vessels, airships or residential property outside of Puerto Rico.If you answered “Yes” to any of the above, indicate whether80% or more of the income was derived from:

• fishing, passengers or cargo transportation, or rental ofvessels;

• passengers or cargo transportation, or rental of airships orautomobiles; or

• property rental to unrelated persons of residential propertyoutside Puerto Rico.

As a general rule, costs related to vessels, airships or residentialproperty outside of Puerto Rico are not deductible under Section1033.17 of the Code. Automobile expenses are limited, as indicatedbelow in Part III of Operating Expenses and Other Costs.

PART II - DETERMINATION OF INCOME FOR THECURRENT YEAR

If you received income from manufacturing, sale of goods,agriculture, services rendered or rental, use Parts II throughVIII of Schedules J, K, L, M and N Individual, as applicable, toprovide the information related to those activities. In the "RegularTax" Column include items of income and expenses to considerfor purposes of normal tax. In the "Alternate Basic Tax" Columnenter the income and expenses that will be taken into accountfor the computation of the net income subject to alternate basictax, as provided in Section 1021.02 of the Code.

As an example, a taxpayer who have an exemption decreeunder Act 14-2017 or Act 60-2019, as amended, receivedeligible income under the decree of $60,000. In addition, hereceived $25,000 for other services not covered by the decree.In this case, the "Regular Tax" Column will report income of$85,000, while only $25,000 will be transferred to the "AlternateBasic Tax" Column, provided that the eligible income under Act14-2017 is not subject to alternate basic tax.

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Schedule J Individual

Line 1 - Include as part of this line the amount reported on line1P from Part III of Form 480.60F.

Line 2 - Enter on this line the amount determined in Part V, line7 of this Schedule.

Line 3 - Enter the result of line 1 subtracted by line 2, ascorresponds, in the columns of Regular Tax and AlternateBasic Tax. To determine the gross profit margin percentage forthe year 2020, divide line 3 by line 1. To determine thecorresponding amount for the year 2019, use the data from the2019 return.

Line 4 - Enter on this line, as applicable:

a) The first $40,000 of gross income from services renderedor self-employment generated by a young individual whoseage fluctuates between 16 and 26 years at the end of thetaxable year. If you qualified for this exemption, enter anamount not exceeding $40,000 and select thecorresponding oval.

b) The first $500,000 of gross income generated by a newbusiness created by a young entrepreneur whose agefluctuates between 16 and 35 years. Said new businessmust have granted a Special Agreement for the Creation ofYoung Businesses (Agreement) with the Puerto Rico Tradeand Export Company, in order to enjoy the exemption forthe first 3 years following the signing of the Agreement. Toclaim the exemption, you must include a copy of theAgreement with the return. This benefit is limited to onenew business for every young entrepreneur and he/shecannot enjoy simultaneously the benefits provided by anylaw granting economic or fiscal incentives to promote acommercial, industrial or tourism operation in Puerto Rico.If you qualify for this exemption, enter an amount notexceeding $500,000 and select the corresponding oval.

For additional details, refer to Act 135-2014.

Schedule K Individual

If during the taxable year you were engaged in the operationof an activity that qualifies as a theatrical business, asprovided by Act 178-2000, and you derived income from thesale of admission tickets for artistic or cultural shows, as well asfrom other sources, you must file two Schedules K Individual.That is because half (50%) of the income derived from the saleof admission tickets is exempt from the payment of income tax.In one Schedule K Individual you must inform the partiallyexempt income, and on the other the fully taxable income.

It is important to point out that expenses related with the theatricalbusiness operation must be assigned in the proportion thatsuch expenses bear with each source of income. Make sure toindicate in Part I of this Schedule, Act 178- 2000.

Line 1 - Include as part of this line the amount reported on line1Q, Part III of Form 480.60F.

Line 2 - Enter on this line the amount determined in the Part V,line 5 of this Schedule.

Line 3 - Enter the result of line 1 subtracted by line 2, ascorresponds, in the Regular Tax and Alternate Basic Taxcolumns. To determine the gross profit margin percentage forthe year 2020, divide line 3 by line 1. To determine the

corresponding amount for the year 2019, use the data from the2019 return.

Line 4 - Refer to the instructions of line 4, Part II of Schedule JIndividual.

Schedule L Individual

Line 1 - Include as part of this line the amount reported on line1R of Part III of Form 480.60F.

Line 2 - Enter on this line the amount determined in the Part V,line 7 of this Schedule.

Line 3 - Enter the result of line 1 subtracted by line 2, ascorresponds, in the columns of Regular Tax and AlternateBasic Tax. To determine the gross profit margin percentage forthe year 2020, divide line 3 by line 1. To determine thecorresponding amount for the year 2019, use the data from the2019 return.

Line 4 - Refer to the instructions of line 4, Part II of Schedule JIndividual.

Schedule M Individual

Line 1 - Enter on this line the total gross income derived fromyour activity of services rendered. If the taxpayer or spousechose to pay the optional tax provided under Section 1021.06of the Code for self-employed individuals engaged in trade orbusiness, make sure to fill in the corresponding oval on thequestionnaire in Part I of this Schedule and transfer this amountto line 1A, Part I of Schedule X Individual. For additionalinformation on this option, refer to the instructions of Schedule XIndividual if you are an individual taxpayer, or to the instructionsof Schedules CO and X Individual, as applicable, if you aremarried.

Include as part of this line the amount reported on line 1S of PartIII of Form 480.60 F.

Line 2 - Enter on this line the total of payments made to aperson who is subcontracted in the exercise of an activity ofservice rendered. To claim this deduction you must havesubmitted the corresponding Forms 480.6SP and have indicatedin them that the reported payments correspond to subcontractedservices.

Line 4 - Refer to the instructions of line 4, Part II of Schedule JIndividual.

Line 6 - Enter on this line the amount reported on line 5(a),Part III of all the Informative Return - Pass-Through Entity(Form 480.60 EC) received from a partnership, specialpartnership or corporation of individuals (pass-through entity).This constitutes the portion of the entity’s net income attributableto the services provided by the partner or shareholder and notpaid as wages or compensation for services. Only this amountcan be used to determine the amount of contribution to a qualifiedplan for the benefit of an individual (“Keogh”). Therefore, donot consider the total net income generated by the partnership,special partnership or corporation of individuals when makingsuch calculation. Also include on this line the amount reported inline 1S from Part III of Form 480.60F.

Schedule N Individual

If the rental income is derived from the lease of a residentialNew Construction Property or Qualified Property, said incomeis totally exempt under the provisions of Act 132-2010, as

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amended. This exemption applies from January 1, 2011onwards until December 31, 2025, regardless of the date thecontract is signed. You must include the income in the return,select the oval corresponding to Act 132-2010 on the top part ofthe Schedule and provide a detail of the physical location of theproperty. This exempt net income must be transferred toSchedule IE Individual, Part II, line 37.

For more details, see Act 132-2010 and the correspondingregulations.

Line 1 - Include as part of this line the amount reported on line1T, Part III of Form 480.60F.

Line 2 - Refer to the instructions of line 4, Part II of Schedule JIndividual.

PART III - OPERATING EXPENSES AND DEDUCTIONS

It is allowed a reasonable deduction for those ordinary andnecessary expenses incurred for the production of incomerelated to your business. For purposes of determining the netincome subject to alternate basic tax, the expenses in this partwere divided into three groups: (A) Deductions reported in aninformative return, (B) Deductions not reported in an informativereturn, and (C) Other deductions. On the other hand, it willnot be allowed to claim expenses attributable to exemptincome or otherwise so excluded from the gross income.

A. Deductions reported in an informative return

Those taxpayers whose taxable year is natural and use thecash basis method, may include the amount of expenses reportedin the informative returns issued for the taxable year 2020 asallowable deduction to determine both, net income subject toregular tax as well as alternate basic tax. In the case of theregular tax, you may deduct those payments for services notreported in an informative return because they did not exceed$500 during the taxable year. However, said payments canonly be deductible to determine the net income subject to alternatebasic tax if they were included in a duly filed informative return.

It is important to point out that, in order to claim expenses, thosetaxpayers under the accrual method of accounting or that havean economic year, must submit with their return a reconciliationbetween the expenses reflected in the accounting books andthe informative returns. Said reconciliation must include theconcept of the deduction that is being claimed, the total amountaccording to the informative return, the amount of the adjustmentfor accrual method or economic year, the amount of any otherapplicable adjustment and the total deduction claimed in thereturn. You can access an example of the reconciliation thatyou must include with the return on our website. It is providedas a link to the 2020 Individual income tax return in the area forReturns, Forms and Schedules.

• Salaries, Commissions and bonuses to Employees

The salaries deduction will be verified by the electronicsystem in order to determine if the amounts claimed agree withthe Withholding Statements and the forms that must be filed bythe employers.

Enter on line 1, "Regular Tax" column, the total payments ofsalaries, commissions and employee bonuses, reported in aWithholding Statement.

In the "Alternate Basic Tax" column, enter 125% of the deductionfor salaries paid and reported in a Withholding Statement.

• Salaries paid to young university students and tothe Department of the Treasury's Internship Program

If you qualify to claim this deduction, enter in the parenthesisprovided on this line, the total amount of salaries paid andreported on the withholding statements.

In the "Regular Tax" column, enter 150% of the deduction ofsalaries paid for each young university student (Total $ _______x 1.5). To qualify for this deduction, the young university studentmust have been employed during at least 20 hours a week for9 months or a minimum of 800 hours during the taxable year,as long as the salary paid is more than $10 per hour and saidsalary is duly reported in a withholding statement.

In the case of students coming from the internships program ofthe Department of the Treasury, the deduction will be 200%(Total $ ________ x 2) if the requirement provided in thepreceding paragraph is met.

In the "Alternate Basic Tax" column, enter 125% of the deductionfor salaries paid and reported in a Withholding Statement. Forthese purposes add the two amounts included in the "Total"lines for each of the salary categories and multiply the result by1.25. Do not use the amount determined in the "Regular Tax"column to do this computation.

For purposes of this deduction, the term "young universitystudent" means a student who has studied during the calendaryear at least one school semester of studies at postsecondarylevel, as a regular student, in a university or post-secondarytechnical-professional institution recognized as such by theeducational authorities of Puerto Rico or the correspondingcountry, until he/she obtains the university or technical-professional degree or have completed the studies within aperiod not exceeding 12 months from the date of starting theemployment. Section 1033.21 of the Code does not establishan age requirement for purposes of this deduction.

• Payments for Services rendered in Puerto Rico

This expense shall be allowed as a deduction, as long as thecontracted services are directly related to the operation of theindustry or business, it is duly reported in the Informative Return- Services Rendered (Form 480.6SP) and, as applicable, thewithholding provided in the Code has been made.

• Payments for Services Rendered outside of PuertoRico

This expense shall be allowed as a deduction if the contractedservices are directly related to the operation of the industry orbusiness and are duly reported in the Informative Return -Payments to Nonresidents or for Services from Sources Outsideof Puerto Rico (Form 480.6C).

• Lease, rent and fees paid

Among the allowed deductions there are those related to rentand other payments required as a condition to continue usingor owning property over which the taxpayer has not acquired,is not acquiring title or in which it has no participation. Lease,rental and fees payments include, in addition to those made forthe use of tangible real or personal property, payments madefor intangible property, such as royalties, patents, franchises orlicenses, when they are made as a condition to continue usingintangible property in the industry or business. To make thesepayments deductible to compute the net income subject toalternate basic tax, they must be duly reported in a Form 480.6A.Segregate in the provided spaces on this line the portion thatcorresponds to personal property and real property.

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• Insurance premiums (Except health or accidentplans)

Shall be allowed as a deduction the total premiums paid whenthe insurance is an essential element for the service renderedor industry, such as malpractice insurance ("bad practice") andinsurance on inventory or other personal or real propertyused in industry or business. To make this deduction allowablefor purposes of the alternate basic tax, these payments must beduly reported in the Optional Informative Return - Advertising,Insurance Premiums, Telecommunication, Internet Access andCable or Satellite Television Services (Form 480.7E), or thatyou receive from the insurer the Annual Return of PaymentsReceived for Advertising, Insurance Premiums,Telecommunication, Internet Access and Cable or SatelliteTelevision Services (Form 480.7F).

Telecommunication services

There shall be allowed as a deduction the amount paid fortelecommunication services, as defined in Section 4010.01(kk)of the Code, directly related to the industry or business operation.To make this deduction allowable for purposes of the alternatebasic tax, these payments must be duly reported in a Form480.7E, or a Form 480.7F must be received from the provider.

Internet and Cable or Satellite Television Services

There shall be allowed as a deduction the amount paid forinternet access service and cable or satellite television servicesdirectly related to the industry or business operation. To makethis deduction allowable for purposes of the alternate basic tax,these payments must be duly reported in a Form 480.7E, or aForm 480.7F must be received from the provider.

Combined services (Bundles)

This expense shall be allowed as a deduction, as long as thecontracted services are directly related to the industry orbusiness operation, the total amount paid is for a set orcombination of services whose value cannot be segregated orassigned to the payment made for said services and is dulyreported in a Form 480.7E, or receive a Form 480.7F from theprovider.

Advertising

There shall be allowed as a deduction the total amount paid foradvertising, promotion, publicity and marketing on radio, pressor television made by an advertising agency, directly related tothe industry or business operation, duly reported in a Form480.7E, or receive a Form 480.7F from the provider.

Royalties

There shall be allowed as a deduction the total amount paid forthe use or privilege of using an intangible asset such as patents,copyrights, goodwill, franchises, licenses or other property ofsimilar nature, duly reported in a Form 480.6A.

Payments for Virtual and Technology Tools and OtherSubscriptions

This expense shall be allowed if the total amount paid for licensesand subscriptions for the use of programs, platforms, applicationsand information systems, among others, including the amountpaid for subscriptions that allow the access to wholesaleestablishments (membership clubs) and electronic or printedpublications, are directly related to the operation of your industryor business and duly reported in a Form 480.6A.

Professional association fees and dues paid for thebenefit of employees

There shall be allowed as a deduction the amount paid toprofessional associations for tuition fees and memberships forthe benefit of your employees or the taxpayer that report his/her industry or business income on these schedules, dulyreported in a Form 480.6A.

Homeowners associations fees

There shall be allowed as a deduction the amount paid tohomeowners' associations for maintenance fees with respect tothe facilities used in your industry or business, duly reported ina Form 480.6A.

Payments for Judicial o Extrajudicial Indemnification

There shall be allowed as deduction total payments made forindemnification under a Court judgment or under an extrajudicialclaim, directly related to the operation of the industry or business,for this the withholding provided by Section 1062.02 of theCode, as applicable, and the corresponding deposit must bemade, and reported in a Form480.6B.

Certain other expenses

There shall be allowed as a deduction the total of those expenseitems for which no specific space is provided in this part and thatthey have been duly reported in an informative return. Youmust keep for your records a schedule detailing such expenses.

B. Deductions not reported in an informative return

Enter on this section those deductions not reported in aninformative return that are allowable for purposes of determiningboth, net income for regular tax and alternate basic taxpurposes, as applicable.

Interest on business debts

There shall be allowed as a deduction the interests expenseon debts incurred for the acquisition of inventory or other realor personal property used in the industry or business. Indicateseparately and them the total, as applicable for the regular taxand alternate basic tax Column.

Taxes, patents and licenses

There shall be allowed as a deduction the amounts paid by taxon real or personal property, patents, licenses, sales and usetax, and State Insurance Fund policy, among others, that arepaid as part of the industry or business.

As part of this line, the taxpayer may include the charges paidto government agencies to keep professional licenses, includingbut not limited to: (i) professional license renewal costs; (ii)charges for the issuance of debt and filing certifications with thedifferent governmental agencies; (iii) annual charges paid tosome governmental instrumentality to exercise some professionor trade; (iv) charges related to the request of use permits orrelated licenses, among others. Likewise, there shall be includedin this part, all payments of taxes imposed by the Governmentof Puerto Rico, Federal Government or any state of the UnitedStates as long as said tax is NOT for income tax.

Special contribution for professional and advisoryservices under Act 48-2013, as amended

Every individual who has signed a contract of professional,advisory, advertising, training or orientation services with an

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agency, dependency or instrumentality of the Government ofPuerto Rico, public corporation, the Legislative Branch, theOffice of the Comptroller, the Office of the Ombudsman and theJudicial Branch, will be subject to a withholding of a SpecialContribution under Act 48-2013, as amended. This amount isequivalent to one point five (1.5%) of the total amount of thecontract.

This contribution will be considered as an ordinary andnecessary expense in Schedules K and M Individual.

For additional information on the scope of thiswithholding, you may refer to the AdministrativeDetermination No. 13-14 of August 28, 2013 and to theCircular Letters issued by Central Accounting Area ofthe Department for such purposes.

Depreciation and amortization

There shall be allowed as a deduction a reasonable amountfor the depletion, wear and tear, including a reasonableallowance for obsolescence of property used in the business,as determined in Schedule E that must be submitted with yourreturn. The Schedule will detail the information and the amountto be deducted from each of the properties for which it claimscurrent, flexible and accelerated depreciation, amortization, andautomobile depreciation.

Depreciation for business with a volume of $3,000,000or less

In these cases the amount that will be allowed as a deductionfor certain properties will be, at the taxpayer's election, pursuantto the provisions of Section 1033.07(a)(1)(G) for computersystems; Section 1033.07(a)(1)(H) for ground transportationequipment, except automobiles; or under Section1033.07(a)(1)(K) for machinery and equipment, furniture andfixtures and any other fixed assets to be used in the industry orbusiness. The election provided here will be made filingSchedule E1 and once made is irrevocable.

For more details, refer to the instructions of Schedule E1.

Electric Power

There shall be allowed as a deduction the total amount paid tothe Electric Power Authority or to any other provider for the useor consumption of electric power and other charges billed,directly related to your industry or business operation.

Taxpayers may take this deduction for purposes of regular taxas well as for alternate basic tax, without the need to report it inan informative return.

Water and Sewage

There shall be allowed as a deduction the total amount paid tothe Aqueduct and Sewer Authority for the use or consumptionof water, sewage and other charges billed, directly related toyour industry or business operation.

Taxpayers may take this deduction for purposes of regular taxas well as for alternate basic tax, without the need to report it inan informative return.

Contributions to health or accident plans

Every individual engaged in a trade or business as self-employed, whose gross income does not exceed $500,000,can deduct as an industry or business expense, the cost of

health insurance paid for himself/herself and his/her family,provided that such health insurance is extended to all employees,if any.

Taxpayers may take this deduction for purposes of regular taxas well as for alternate basic tax, without the need to report it inan informative return.

In the case of individuals who claim this deduction on ScheduleA Individual, they cannot include the cost paid for healthinsurance as a deduction for medical expenses.

Federal Self-Employment Tax

Every individual engaged in a trade or business, is entitled todeduct from the gross income 50% of the federal self employmenttax paid to the Internal Revenue Service on the income reportedfor the same taxable year.

• Contributions to Qualified Pension Plans

The Code allows a deduction for contributions toqualified pension plans under Section 1081.01 of theCode. To claim the deduction for contributions made toany of said plans, it will be necessary to keep for yourrecords the information required by the Regulationsunder the Code. Also, you must complete and submitwith the return Form AS 6042.1 (Deduction forContributions to Qualified Retirement Plans and Tax onCertain Contributions).

Contributions made to a qualified plan or plans for the benefit ofan individual, commonly known as “Keogh Plans”, cannotexceed 25% (15% if a profit sharing plan) of your earnedincome without considering said deduction or $57,000,whichever is smaller, as provided in Internal Revenue CircularLetter No. 19-17 of December 28, 2019. Since this deductionand the net profits from sole proprietorship income depend oneach other, it is required to adjust the amount of said net profits.This adjustment can be determined indirectly through thereduction in the percentage of contributions made, attributableto said individual. The contribution’s adjusted percentage andthe deduction for contributions can be determined as follows:

(A) Percentage of contributions according to the plan %(B) Percentage in (A), reflected in decimal, plus 1 1._(C) Adjusted percentage (divide (A) by (B)) %(D) Net gains (without adjustment) $(E) Maximum deduction (multiply (D) by (C)) $

C. Other deductions: Indicate those that were validatedwith an AUP or a DDC

There shall be allowed as a deduction to determine the netincome subject to alternate basic tax, all ordinary and necessaryexpenses of your industry or business claimed to determinethe net income subject to normal tax provided in Section 1021.01of the Code, as long as you include with your income tax returnan Agreed Upon Procedures Report (AUP) or an AuditedFinancial Statement prepared by a CPA with a license in forcein Puerto Rico, certifying that the expenses claimed are ordinaryand necessary expenses to generate the self-employmentincome. For more information, refer to the InternalRevenue Circular Letter No. 19-14 (CC RI 19-14).

However, for taxable years beginning after the December 31,2019, those individuals whose business volume is less than $1million, may choose to submit along with the return the DueDiligence Checklist by Accredited Agent-Tax Return Specialist

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(Schedule DDC Individual), which will be sworn by anAccredited Agent-Tax Returns Specialist who meets therequirements provided under Section 6074.01 of the Code,instead of the Agreed Upon Procedures prepared by the CPA.

To be considered in the column "Alternate Basic Tax", fill in theoval, as applicable, that indicates AUP or DDC for thoseexpenses items that were included in the agreed uponprocedures report or in the due diligence verification form(Schedule DDC Individual). It is important that in theQuestionnaire, the report to be included with the return, hasbeen selected: (1) Audited Financial Statement; (2) AUP; or (3)DDC.

If it was selected in the Questionnaire that the taxpayer isincluding audited financial statements with the return, you mayclaim the ordinary and necessary expenses incurred in thealternate Basic Tax Column without the need to fill in the AUPor DDC ovals. Therefore, you will not have limits regardingthe category of expenses to be claimed in the Alternate BasicTax column.

If you do not select the corresponding oval, and do not submitthe Agreed Upon Procedure Report or the Audited FinancialStatement, or Schedule DDC Individual, you cannot claim thedeductions provided in this section for purposes of determiningthe net income subject to alternate basic tax.

Automobile and Other Motor Vehicle Expenses

Taxpayers engaged in trade or business in Puerto Rico andwho are subject to the provisions of Section 1033.07(a)(3)(g)of the Code, may elect to claim on line 29 of Schedules J and KIndividual, in the corresponding line, as applicable, the deductionfor the expenses incurred or paid for the use and maintenanceof an automobile based in one of the following alternatives:

1) the expense based on a standard mileage rate of sixty cents($0.60) per each mile used by the taxpayer to carry out theindustry or business or for the production of income; or

2) the actual expenses for the use and maintenance of anautomobile incurred by the taxpayer in his/her industry orbusiness or for the production of income, including thoseduly documented by the employees under a reimbursementplan established by their employer.

However, once you choose one of the alternatives, the taxpayerwill be required to use the same during the entire taxableperiod.

Administrative Determination No. 15-01 of January 9, 2015(AD 15-01), repealed several articles of Regulation No. 8297of December 18, 2012, related to the requirements to claim thededuction for expenses incurred or paid for the use andmaintenance of automobile. For additional details, see AD 15-01.

The automobile use and maintenance expense includes repairs,insurance, gasoline, oil and filter changes, cleaning, tires, annuallicense fees and other costs of a similar nature.

This expense does not include depreciation, rental paymentson ordinary leases or financial leases which are claimed online 18 of Schedules J, K, L, M and N Individual. Also, do notinclude expenses related to the use of tolls or parking.

For these purposes, the term “automobile” include any motorvehicle manufactured to transit in public roads and designed for

transporting people, but does not include the following:

those used directly in the business of transportingpassengers or property for which compensation orpayment is made, such as limousines, taxis and publicvehicles;

funeral cars, flower carriages, buses, ambulances,motorcycles, trucks, vans and any other similar vehicleused primarily to transport cargo; and

cars rented or held for rental by persons regularly engagedin the business of car leasing.

If you incurred expenses for vehicles which are not consideredautomobiles according to the above definition, you shouldclaim them on line 31 of Schedules J, K and M Individual, online 32 of Schedule L Individual or on line 29 of Schedule NIndividual.

Travel expenses

There shall be allowed as a deduction for travel expenses andlodging up to 50% of the actual amount paid or incurred. Indicatein the provided parenthesis the amount actually paid.

• Meal and Entertainment Expenses

It may be deducted up to 25% of the total amount for meal andentertainment expenses incurred or paid during the year.However, said deduction cannot exceed 25% of the grossincome.

PART IV - DETERMINATION OF GAIN OR LOSS

If you received income from manufacturing, sale of goods,agriculture, service rendered or rents, use this Part ofSchedules J, K, L, M and N Individual, as applicable, todetermine the gain or loss. In the "Regular Tax" column includethe items to be consider for purposes of the normal tax. In the"Alternate Basic Tax" column enter the items to be consider forthe computation of the alternate basic tax, as provided in Section1021.02 of the Code.

Schedule J Individual

Line 1 - The result of this line may be a positive or negativenumber. In those cases where the result in the alternate basictax Column be a loss, it only may be transferred to thecorresponding line of Schedule O Individual, if the taxpayerindicates that the business activity that generated the lossconstitutes his/her principal industry or business. This meansthat when the loss generated does not comes from the taxpayer'sprincipal industry or business, he/she will not transfer said lossand will include zero in the corresponding line of Schedule OIndividual.

For purposes of the alternate basic tax Column, you will nothave to complete lines 2 through 5 of this Part IV.

Line 2 - Indicate on this line the total net operating losses fromprevious years, as determined in Column D, Part VIII of thisSchedule.

Line 4 - If you derived income from an industry or businesscovered by a tax exemption decree granted under any taxincentives act, indicate the tax exemption percentage (%) grantedin you decree. Multiply the amount on line 3 by the correspondingexemption percentage, and enter the result on this line.

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Line 5 - If you derived a profit in the conduct of the trade orbusiness, transfer this amount to page 2, Part 1, line 2P of thereturn or Part I, line 3P, Column B or C of Schedule COIndividual, as applicable. If operations resulted in a loss, seedetails on the treatment of losses of a trade or business in theINSTRUCTIONS TO COMPLETE THE RETURN: Part 1,line 2 - Other Income (or Losses), under the previouslydiscussed topic regarding the net operating losses fromprevious years and instructions of Part VIII of thisSchedule.

The result of this line may be a positive or negative number. Inthose cases where the result in the regular tax Column is aloss, it can only be transferred to the corresponding line onpage 2 of the return (or Schedule CO Individual in the case oftaxpayers who file under the optional computation) if the taxpayerindicates that the business activity that generated the lossconstitutes his/her principal industry or business. However, theamount of the loss to be transferred will be limited to the incomeof other industry and business activities that are being reportedin page 2 of the return, which does not include wages andpassive income. This means that when the loss generateddoes not come from the taxpayer's principal industry or business,said loss cannot be transferred and will include zero on thecorresponding line on page 2 of the return (or Schedule COIndividual), as applicable.

If the income is derived from a business that has been granteda tax exemption decree under the provisions of Act 135-1997(rate of 10%, 7%, 4%, 2% or other) or any other incentivesact which gain is subject to a preferential rate, also transfer thetotal gain to the corresponding Column of line 4(i) of ScheduleA2 Individual, in accordance to the applicable tax rate.

Make sure that you indicated in Part I of this Schedulethe applicable incentives act and the case or decreenumber that entitles you to the preferential rate.

Schedule K Individual

Line 1 - The result of this line may be a positive or negativenumber. In those cases where the result in the alternate basictax column be a loss, it will only be transferred to thecorresponding line of Schedule O Individual, if the taxpayerindicates that the business activity that generated the lossconstitutes his/her principal industry or business. This meansthat when the loss generated does not comes from the taxpayer'sprincipal industry or business, he/she will not transfer said lossand will include zero in the corresponding line of Schedule OIndividual.

For purposes of the alternate basic tax Column, you will nothave to complete lines 2 through 5 of this Part IV.

Line 2 - Indicate on this line the total net operating losses fromprevious years, as determined in Column D, Part VII of thisSchedule.

Line 4 - If you derived income from an industry or businesscovered by a tax exemption decree granted under any taxincentives act, indicate the tax exemption percentage (%) grantedin you decree. Multiply the amount on line 3 by the correspondingexemption percentage, and enter the result on this line.

Line 5 - If you derived a profit in the conduct of the trade orbusiness, transfer this amount to page 2, Part 1, line 2Q of thereturn or Part I, line 3Q, Column B or C of Schedule COIndividual, as applicable. If operations resulted in a loss, seedetails on the treatment of losses of a trade or business in theINSTRUCTIONS TO COMPLETE THE RETURN: Part 1,

line 2 - Other Income (or Losses), under the previouslydiscussed topic regarding the net operating losses fromprevious years and instructions of Part VII of thisSchedule.

The result of this line may be a positive or negative number. Inthose cases where the result in the regular tax Column is aloss, it can only be transferred to the corresponding line onpage 2 of the return (or Schedule CO Individual in the case oftaxpayers who file under the optional computation) if the taxpayerindicates that the business activity that generated the lossconstitutes his/her principal industry or business. However, theamount of the loss to be transferred will be limited to the incomeof other industry and business activities that are being reportedin page 2 of the return, which does not include wages andpassive income. This means that when the loss generateddoes not come from the taxpayer's principal industry or business,said loss cannot be transferred and will include zero on thecorresponding line on page 2 of the return (or Schedule COIndividual), as applicable.

If the income is derived from a business that has been granteda tax exemption decree under any other incentives act whichgain is subject to a preferential rate, also transfer the total gainto the corresponding Column of line 4(i) of Schedule A2Individual, in accordance to the applicable tax rate.

Schedule L Individual

Line 1 - The result of this line may be a positive or negativenumber. In those cases where the result in the alternate basictax column be a loss, it will only be transferred to thecorresponding line of Schedule O Individual, if the taxpayerindicates that the business activity that generated the lossconstitutes his/her principal industry or business. This meansthat when the loss generated does not comes from the taxpayer'sprincipal industry or business, he/she will not transfer said lossand will include zero in corresponding line of Schedule OIndividual.

For purposes of the for alternate basic tax column, you will nothave to complete lines 2 through 5 of this Part IV.

Line 2 - Indicate on this line the total net operating losses fromprevious years, as determined in Column D, Part VIII of thisSchedule.

Line 4 - If you derived income from an industry or businesscovered by a tax exemption decree granted under any taxincentives act, indicate the tax exemption percentage (%) grantedin you decree. Multiply the amount on line 3 by the correspondingexemption percentage, and enter the result on this line.

Line 5 - If you derived a profit in the conduct of the trade orbusiness, transfer this amount to page 2, Part 1, line 2R of thereturn or Part I, line 3R, Column B or C of Schedule COIndividual, as applicable. If operations resulted in a loss, seedetails on the treatment of losses of a trade or business in theINSTRUCTIONS TO COMPLETE THE RETURN: Part 1,line 2 - Other Income (or Losses), under the previouslydiscussed topic regarding the net operating losses fromprevious years and instructions of Part VIII of thisSchedule.

The result of this line may be a positive or negative number. Inthose cases where the result in the regular tax Column is aloss, it can only be transferred to the corresponding line onpage 2 of the return (or Schedule CO Individual in the case oftaxpayers who file under the optional computation) if the taxpayerindicates that the business activity that generated the lossconstitutes his/her principal industry or business. However, the

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amount of the loss to be transferred will be limited to the incomeof other industry and business activities that are being reportedin page 2 of the return, which does not include wages andpassive income. This means that when the loss generateddoes not come from the principal industry or business of thetaxpayer, said loss cannot be transferred and will include zeroon the corresponding line on page 2 of the return (or ScheduleCO Individual), as applicable.

If the income is derived from a business that has been granted atax exemption decree under the provisions of any other incentivesact which gain is subject to a preferential rate, also transfer thetotal gain to the corresponding Column of line 4(i) of Schedule A2Individual, in accordance to the applicable tax rate.

Make sure that you indicated in Part I of this Schedulethe applicable incentives act and the case or decreenumber that entitles you to the preferential rate.

Schedule M Individual

Line 1 - The result of this line may be a positive or negativenumber. In those cases where the result in the alternate basictax column be a loss, it will only be transferred to thecorresponding line of Schedule O Individual, if the taxpayerindicates that the business activity that generated the lossconstitutes his/her principal industry or business. This meansthat when the loss generated does not comes from the taxpayer'sprincipal industry or business, he/she will not transfer said lossand will include zero in corresponding line of Schedule OIndividual.

For purposes of the alternate basic tax Column, you will nothave to complete lines 2 through 5 of this Part IV.

Line 2 - Indicate on this line the total net operating losses fromprevious years, as determined in Column D, Part VI of thisSchedule.

Line 4 - If you derived income from an industry or businesscovered by a tax exemption decree granted under any taxincentives act, indicate the tax exemption percentage (%) grantedin you decree. Multiply the amount on line 3 by the correspondingexemption percentage and enter the result on this line.

Line 5 - If you derived a profit in the conduct of the trade orbusiness, transfer this amount to page 2, Part 1, line 2S of thereturn or Part I, line 3S, Column B or C of Schedule COIndividual, as applicable. If operations resulted in a loss, seedetails on the treatment of losses of a trade or business inthe INSTRUCTIONS TO COMPLETE THE RETURN: Part 1,line 2 - Other Income (or Losses), under the previouslydiscussed topic regarding the net operating losses fromprevious years and instructions of Part VI of thisSchedule.

The result of this line may be a positive or negative number. Inthose cases where the result in the regular tax Column is aloss, it can only be transferred to the corresponding line onpage 2 of the return (or Schedule CO Individual in the case oftaxpayers who file under the optional computation) if the taxpayerindicates that the business activity that generated the lossconstitutes his/her principal industry or business. However, theamount of the loss to be transferred will be limited to the incomeof other industry and business activities that are being reportedin page 2 of the return, which does not include wages andpassive income. This means that when the loss generated doesnot come from the principal industry or business of the taxpayer,said loss cannot be transferred and will include zero on thecorresponding line on page 2 of the return (or Schedule COIndividual), as applicable.

If the income is derived by a Qualified Physician who have adecree under Act 14-2017 (rate of 4%) or any other incentivesact which gain is subject to a preferential rate, also transfer thetotal gain to the corresponding Column of line 4(i) of ScheduleA2 Individual, in accordance to the applicable tax rate.

Make sure that you indicated in Part I of this Schedulethe applicable incentives act and the case or decreenumber that entitles you to the preferential rate.

Schedule N Individual

Line 1 - The result of this line may be a positive or negativenumber. In those cases where the result in the alternate basictax column be a loss, it will only be transferred to thecorresponding line of Schedule O Individual, if the taxpayerindicates that the business activity that generated the lossconstitutes his/her principal industry or business. However, theamount of the loss to be transferred will be limited to the incomeof other industry and business activities that are being reportedin page 2 of the return, which does not include wages andpassive income. This means that when the loss generateddoes not comes from the taxpayer's principal industry orbusiness, he/she will not transfer said loss and will include zeroin the corresponding line of Schedule O Individual.

For purposes of the alternate basic tax Column, you will nothave to complete lines 2 through 5 of this Part IV.

Line 2 - Indicate on this line the total net operating losses fromprevious years, as determined in Column D, Part VI of thisSchedule (for purposes of rental loss, the total in Column Dshall be the result of Column A less Column B).

Line 4 - If you derived income from an industry or businesscovered by a tax exemption decree granted under any taxincentives act, indicate the tax exemption percentage (%) grantedin you decree. Multiply the amount on line 3 by the correspondingexemption percentage, and enter the result on this line.

Line 5 - If you derived a profit in the conduct of a rental business,transfer this amount to page 2, Part 1, line 2T of the return orPart I, line 3T, Column B or C of Schedule CO Individual, asapplicable. If operations resulted in a loss, see additional detailson the treatment of losses of a trade or business in theINSTRUCTIONS TO COMPLETE THE RETURN: Part 1,line 2 - Other Income (or Losses), under the previouslydiscussed topic regarding the net operating losses fromprevious years and instructions of Part VI of thisSchedule.

The result of this line may be a positive or negative number.In those cases where the result in the regular tax Column is aloss, it can only be transferred to the corresponding line onpage 2 of the return (or Schedule CO Individual in the case oftaxpayers who file under the optional computation) if thetaxpayer indicates that the business activity that generatedthe loss constitutes his/her principal industry or business.This means that when the loss generated does not come fromthe principal industry or business of the taxpayer, said losscannot be transferred and will include zero on thecorresponding line on page 2 of the return (or Schedule COIndividual), as applicable.

If the income is derived from a business that has been granteda tax exemption decree under any other incentives act whichgain is subject to a preferential rate, also transfer the total gainto the corresponding Column of line 4(i) of Schedule A2Individual, in accordance to the applicable tax rate.

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Make sure that you indicated in Part I of this Schedulethe applicable incentives act and the case or decreenumber that entitles you to the preferential rate.

PART VI (SCHEDULES J AND L INDIVIDUAL) - OTHERDIRECT COSTS

This Part is provided to detail other direct costs that are allowableto determine the cost of goods sold in Part V. It will be an allowableexpense if it constitute an essential direct cost to carry out theindustry or business if it is an essential element of production.

PART V (SCHEDULES M AND N INDIVIDUAL), PART VI(SCHEDULE K INDIVIDUAL) AND PART VII(SCHEDULES J AND L INDIVIDUAL) - DETAIL OF OTHEREXPENSES

Those expense items for which there are no specific spacesprovided in Part III of Schedules J, K, L, M and N Individual,shall be described and reported as Other Expenses. Thetaxpayer must provide a description of the nature and amountof the items claimed and will present the total of these as adeduction for other expenses on line 44, Part III of Schedules J,K and M Individual; on line 45, Part III of Schedule L Individual;or on line 42, Part III of Schedule N Individual.

This amount will be transferred only to the corresponding line ofOther expenses, regular tax Column. No amount will betransferred to the alternate basic tax Column.

The Code provides a $400 deduction for employers fromprivate industries for each severely disabled person thatis employed for at least 20 hours per week for nine monthsduring the taxable year. This deduction will be allowed for up tofive severely disabled persons employed. The regulations inforce applicable from the Vocational Rehabilitation Program ofthe Department of the Family, will be used for the definition of theterm “severely disabled person”. You must keep for yourrecords:

1) a certification indicating that the person for which the deduction is claimed, has been an employee for at least

nine months of the taxable year in which the deduction isclaimed, and

2) a certification issued by the Secretary of the Department ofthe Family, indicating that the individual for which thededuction is claimed is a severely disabled person, inaccordance to the regulations and procedures of saidDepartment.

The contributions made by an employer to an EducationalContribution Account, for a beneficiary designated by anemployee, are deductible as part of the operating expenses ofthe industry or business, as long as the requirements establishedby law are met.

Every employer may claim annually as an operating expenseof the industry or business, an amount equal to a month ofsalary for each employee to whom you have granted the rightto nurse their babies or express their breast milk during onehour within each full time working day that can be divided in twoperiods of 30 minutes or three periods of 20 minutes. In thecase of companies considered as small businesses by theFederal Small Business Administration, the period will be onehalf hour of each full time working day, that can be divided in twoperiods of 15 minutes.

Every industry or business that meets the requirementsestablished in Act 212-2002, that creates new employments as

part of a urban center rehabilitation process, will be entitled to aspecial additional deduction equivalent to 5% of the minimumsalary applicable to each new employment created. Also, thetransfer of your business with a minimum of 5 employees to aurban center will entitle you to an additional deduction equivalentto 15% of the payroll expenses related to the employeestransferred during the year in which the business was transferred.The limit for this deduction will be 50% of the net income accordingto the Code, adjusted by the special deductions provided by Act212-2002, without considering this deduction.

These deductions will be available for a term of 5 years fromthe taxable year in which the taxpayer applies for these benefits.You must keep for your records a certification issued by theTerritorial Ordinance Office or from the City Planning Directorindicating the name, social security number and minimum salaryfor each new employment created; or name and accountnumber of the transferred business, its previous location, nameand social security number of the transferred employees, andthe amount of payroll related to said employees. For bothdeductions you must also specify the taxable year in which youapplied for these benefits and their due dates. Also, theaccelerated depreciation of the construction cost is allowed.

For details of these special deductions you must refer to Act212-2002 and the corresponding regulation.

PART VI (SCHEDULES M AND N INDIVIDUAL), PART VII(SCHEDULE K INDIVIDUAL) AND PART VIII(SCHEDULES J AND L INDIVIDUAL) - NET OPERATINGLOSSES FROM PREVIOUS YEARS

Complete this part to determine the amount available of the netoperating loss from previous years.

Losses incurred in an industry or business that is the taxpayer'sor the spouse's principal business or industry, may be claimedagainst the income from other sources, except from salariesand pensions. Those losses incurred in activities that are notthe taxpayer's or his/her spouse's principal business or industry,may be deducted only against future income from the specificactivity that produced the loss.

On this Part, as it corresponds, you must indicate the year inwhich the loss was incurred, the loss incurred, the amountused in previous years, the adjustment required under Section1033.14(b)(1)(E) of the Code, the amount available and theexpiration date, if any.

Any excess in the losses incurred by the principal business orindustry during one year may be claimed in future years, asapplicable, according to the period when the loss has beengenerated:

• For taxable years beginning before January 1, 2005, thelosses incurred have a carryover period to each one of thefollowing seven (7) taxable years.

• For taxable years beginning after December 31, 2004 andbefore January 1, 2013, the carryover period for theincurred losses will be twelve (12) years.

• For losses incurred in taxable years beginning afterDecember 31, 2012, according to the limits provided bySection 1033.14(b)(1)(D) of the Code, the carryover periodwill be ten (10) years.

• In the case of a new business that operates under a SpecialAgreement for the Creation of Jobs, as provided by Act 1-2013, they may deduct the net operating losses incurred in thefirst two (2) years of the Agreement, for a ten (10) year period.

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On the other hand, any excess in the losses incurred in anactivity that is not the principal industry or business, shall betreated as an allowable deduction against the gross incomefrom such activity in subsequent taxable years. These losseswill not have an expiration date.

See additional details on the treatment of losses of a trade orbusiness in the INSTRUCTIONS TO COMPLETE THERETURN: Part 1, line 2 - Other Income (or Losses), and in thecorresponding part of Schedules J, K, L, M and N Individual.

SCHEDULE O INDIVIDUAL - ALTERNATE BASIC TAX

Complete this Schedule if the net income subject to alternatebasic tax is more than $25,000.

Taxpayers who only receive income from wages reported onlines 1(B) and 1(C) of Part 1, page 2 of the return or lines 1 and2, Part I of Schedule CO Individual, as applicable, will not besubject to the Alternate Basic Tax. Therefore, it is not necessaryto include this schedule with the return.

This schedule shall not be necessary for those taxpayers whoonly receive income from pensions reported in Schedule HIndividual and for which the exemption of $11,000 or $ 15,000has been claimed on line 8, Part II of Schedule H Individual.

An alternate basic tax will be assessed, determined inaccordance to the following table and reduced by the alternatebasic credit for taxes paid to foreign countries, when the sameis more than the regular tax:

Net Income Subject to Alternate Tax rate:Basic Tax:

Over $25,000,but not over $50,000 1%

Over $50,000,but not over $75,000 3%

Over $75,000,but not over $150,000 5%

Over $150,000,but not over $250,000 10%

Over $250,000 24%

In the case of married persons filing separate returns or thatchoose the optional computation of tax, levels of net incomesubject to alternate basic tax shall be determined separately asan individual taxpayer.

For more details, refer to Regulation No. 8329 of January 9, 2013.

PART I – DETERMINATION OF NET INCOME SUBJECTTO ALTERNATE BASIC TAX

Lines 1 through 5 - To determine the net income subject toalternate basic tax, transfer to lines 1 through 5 the item of netincome, as applicable, determined on line 1, Part IV, in thealternate basic tax Column from Schedules J, K, L, M and NIndividual.

If there is a loss on line 1 of Part IV, alternate basic tax Columnof Schedules J, K, L, M or N Individual that does not come fromthe principal industry or business of the taxpayer, said loss willnot be transferred and will be included zero on the applicableline on this Schedule.

Similarly, line 5 may reflect zero, if the rental income determinedon Schedule N Individual, comes from the leasing of a NewConstruction Property or Qualified residential property under

Act 132- 2010. This income is fully exempt according to theprovisions of this law.

Line 6 - Enter on this line the result of the sum of lines 1 and2(A) through 2(O) of Part 1, page 2 of the return.

In the case of married taxpayers who choose the optionalcomputation, it will be the sum of lines 1, 2 and 3(A) through3(O), Part I, Column B or C (taxpayer or spouse, as applicable)of Schedule CO Individual.

Line 7 - Enter on this line the total amount of deductions allowedby special acts that have not been considered under Section1033.15 of the Code and that are directly related with theoperation of the industry or business.

Line 8 - Transfer to this line the distributable share on theadjustments for purposes of the alternate basic tax of pass-through entities, according to the identified line of Form 480.60EC.

Line 9 - For purposes of the alternate basic tax for taxableyears 2009 and 2010, it was required that a partner’s share inthe profit or loss from a special partnership engaged in theedification, installation and construction of structures that covera period in excess of one year, be determined by the accountingmethod known as “percentage of completion method”.Therefore, if for those taxable years any other accountingmethod was used, the partner’s share in the profit or loss fromthe special partnership had to be recalculated under thepercentage of completion method and the difference to determinethe net income subject to alternate basic tax had to be includedon this line.

This adjustment is no longer required under the Code.Nevertheless, for those taxpayers who have made thisadjustment in 2009 and/or 2010, this line is provided to avoidthe duplication of the income that was already recognized inthose taxable years for purposes of the alternate basic tax, atthe moment in which the income is recognized by the specialpartnership according to the accounting method that was notthe percentage of completion.

Line 10 – Transfer to this line the distributable share on theadjustments for purposes of the alternate basic tax of revocabletrust or grantor trust, according to the identified line of Form480.60 F.

Line 11 – Enter the total amount of exclusions and exemptionsthat are not derived from Subtitle A of the Code, even if they aregranted by special laws, except those provided by:

Act 225-1995, as amended, known as the Puerto RicoAgricultural Incentives Act;Act 73-2008, as amended, known as the EconomicIncentives for the Development of Puerto Rico Act or anyother previous or successor act of a similar nature;Act 83-2010, known as the Puerto Rico Green EnergyIncentives Act or any other previous or successor act ofa similar nature; orAct 78-1993, as amended, known as the Puerto RicoTourism Development Act of 1993, or any successoract, including the Puerto Rico Tourism Development Act of2010.

To determine the exclusions and exemptions to the alternatebasic tax (Column 2) on Schedule IE Individual, do not considerthe exempt or excluded income provided by the above acts.

Transfer to this line the amount from line 2 of Part III of ScheduleIE Individual.

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Line 12- Enter on this line those items considered to determinethe adjusted gross income in the return that for the provisions ofa special act are not considered to determine the alternatebasic tax.

Provide a breakdown with the amount, concept of the adjustmentand the legislation that provides for such item not to be subjectto the payment of alternate basic tax.

Line 14 - Do not use this line to the extent that wages paidunder the benefits of Act 14-2017 or Act 60-2019 are notincluded on line 6 of this Part I. Therefore, this line will be usedonly if the taxpayer received salaries under these acts.

Line 15 - Enter on this line the allowable deduction for a creditedinvestor under Act 185-2014 or Act 60-2019. For more details,refer to the instructions of line 12, Part 2 of the return.

Line 17 - The same deductions admitted under Sections1033.15 of the Code and the allowances for personal exemptionand exemption for dependents provided by Section 1033.18of the Code are allowed as reductions to determine the netincome subject to alternate basic tax. Transfer from Part 2, line10 of the return or from Part II, line 8 of Schedule CO Individual,according to the corresponding column, the total applicabledeductions to individuals, personal exemption and exemptionfor dependents.

PART II - ALTERNATE BASIC TAX COMPUTATION

Line 5 - To determine the alternate basic tax, you may claimthe credit for taxes paid to the United States, its states, territoriesand possessions and foreign countries with certain adjustments.Therefore, to determine the credit to be claimed on this line it isnecessary to recalculate the credit determined on Schedule CIndividual for the regular tax (line 3 of Part II of this Schedule)substituting the tax determined by the alternate basic tax andthe net income by the net income subject to alternate basic tax.

For details, see the instructions for Schedule C Individual. It isnecessary to identify Schedule C Individual as “computed forthe alternate basic tax” on the upper part and that you submitboth Schedules C Individual with your return.

PART III - COMPUTATION OF THE CREDIT FORALTERNATE BASIC TAX

Use this part to determine the amount of the credit for alternatebasic tax paid in excess over the regular tax, not used in previoustaxable years. In order to claim this credit, the sum of the regulartax and the gradual adjustment of the current taxable year mustbe more than the alternate basic tax for the same year. Followthe instructions that are provided on each line.

The amount of credit for alternate basic tax of previous taxableyears is equivalent to the sum of the excess of alternate basic taxover the regular tax determined annually for each of the taxableyears beginning on December 31, 2008 and ending beforeJanuary 1, 2014, and for taxable years beginning after December31, 2018, as determined in Part IV of this Schedule, reduced bythe amount of alternate basic tax credits previously claimed.

If you paid taxes to the United States, its states, territories andpossessions or any foreign country, the regular tax and thealternate basic tax shall be reduced by the amount applicableof the credit for tax paid to those places.

The alternate basic tax credit cannot be more than 25% of theexcess of the net regular tax over the net alternate basic taxdetermined for the current year. Any balance of the credit notclaimed may be carried over to subsequent years until totally used.

PART IV – DETERMINATION OF THE ALTERNATE BASICTAX PAID IN PREVIOUS YEARS NOT CLAIMED AS CREDIT

Complete this Part and determine the amount of carryover of alternatebasic tax paid in previous years and not claimed as credit that isavailable for the taxable year. You must include the alternate basictax paid in excess of the regular tax, the amount previously used ascredit and the amount available. This amount will be used for thecomputation of the alternate basic tax. The amount of alternate basictax that has been paid in the return for 2019 will be added as part ofthe amounts available for the year 2013.

For additional details, refer to Section 1021.02(a)(6) ofthe Code and Regulation No. 7887 of July 7, 2010.

SCHEDULE P INDIVIDUAL - GRADUAL ADJUSTMENT

In the case of taxpayers whose net taxable income is over$500,000, the Code provides for a gradual adjustment to thetax rates lower than 33% and the personal exemption andexemption for dependents. If married filing separately or if youchoose the optional computation of tax in the case of marriedpersons living together and filing a joint return, this limit isdetermined separately as if it were an individual taxpayer.

If the net taxable income in Part 2, line 13 of the return, line 15,Column B or C of Schedule CO Individual or line 11, Column Aof Schedule A2 Individual is over $500,000, you will be subjectto this adjustment.

SCHEDULE R INDIVIDUAL - PARTNERSHIPS,SPECIAL PARTNERSHIPS AND CORPORATIONS OFINDIVIDUALS (RECONCILIATION)

Complete Schedule R Individual, following the instructions oneach line. This schedule contains a reconciliation of the informationprovided in all Schedules R1 Individual which are includedwith the return.

Part I of Schedule R Individual is used to determine in theaggregate the total distributable share in the business volumeof pass-through entities. In Part II determine the net income orloss from the partner's interest in one or more partnerships andspecial partnerships, and in Part III, the net income or loss fromthe share in corporations of individuals. In Part IV it is providedto determine in the aggregate net loss of partnerships, specialpartnerships and corporations of individuals that can be used.

PART I - QUESTIONNAIRE

The amounts to be included in this Part I shall be carried overfrom Schedule R1 Individual and will be used to determine thegross income from the interests in pass-through entities to beincluded on line 2K, Part 2 of the return and that is used tocompute the limitations to certain items of the return.

Line 11 - In addition to consider the exempt income reported online 2(d), Parts I and III of Schedule R1 Individual, it will be alsoincluded income items from lines 2(c) and 2(e), Parts I and III ofSchedule R1 Individual. These amounts are part of the businessvolume of the pass-through entity, but they are reported in otherschedules of the return, and therefore, are part of the grossincome computation of the schedules to which were transferred.For example, dividend income reported by a pass-through entityis part of the business volume of said pass-through entity, but thisamount is reported as part of the income on Schedule FFIndividual. Therefore, said amount of dividends already is part ofthe gross income from dividends that are reported in the total line(Total $ _____) included on line 2D, Part 2 of the return or in PartI, line 3D of Schedule CO Individual.

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PART IV - DISTRIBUTABLE SHARE ON BENEFITS FROMPARTNERSHIPS, SPECIAAL PARTNERSHIPS ANDCORPORATIONS OF INDIVIDUALS

Line 4 - The amount allowed as loss cannot exceed 90% ofthe aggregate net income derived from partnerships, specialpartnerships and corporations of individuals generated duringthe current taxable year.

Line 6 - If the result is a net loss, it is not deductible, but youmay carry it to future years. The balance of the carry forwardloss is attributed proportionally to the loss in each one of theentities. The allocation will be done by using as a factor theadjusted basis of the partner or stockholder share in each of theentities at the close of the taxable year.

For additional information, refer to instructions of Schedule R1Individual.

SCHEDULE R1 INDIVIDUAL - PARTNERSHIPS,SPECIAL PARTNERSHIPS AND CORPORATIONS OFINDIVIDUALS

Complete Schedule R1 Individual, if you are a partner of oneor more partnerships or special partnerships or a shareholderof one or more corporations of individuals. If you have share inmore than three partnerships and special partnerships or inmore than three corporations of individuals, you must completeand submit with the return the amount of Schedules R1Individualthat are necessary and indicate the amount of schedulesincluded.

If you choose the optional computation of tax in the case ofmarried persons living together and filing a joint return, youmust complete and include with your return a Schedule R1Individual for each spouse that has share in any ofthese entities. Select the oval that identifies the taxpayer orhis/her spouse, respectively.

Part I of Schedule R1 Individual is used every year to determinethe taxpayer’s adjusted basis in each partnership or specialpartnership. Also, you must indicate the type of form from whichthe information to be included in this schedule comes (Form480.60 EC or K-1), type of taxable year (calendar or fiscal),name and employer identification number of the entity, and thecontrol and electronic filing confirmation number of Form 480.60EC received, as applicable.

Also, you must indicate whether the entity elected the optionaltax under Section 1071.10 of the Code. As provided in thisSection, the partners will not be responsible for the payment ofthe income tax of the partnership for the year of the election,and for those purposes, the distributable share received by thepartner will be considered an exclusion from gross income,although it will be considered to determine the tax base of thepartner's share in the partnership. However, the taxpayer willnot transfer the amount reported on line 24 of Part III of Form480.60 EC to Schedule IE Individual. Therefore, this amountwill not be used to determine the limitation of mortgage interest.

Part II of this Schedule is used to determine the taxpayerdistributable share on the net profit or loss of one or morepartnerships or special partnerships, including those lossescarried over from previous years.

Part III of Schedule R1 is used every year to determine thetaxpayer’s adjusted basis in each corporation of individuals.Also, you must indicate the type of taxable year (calendar orfiscal), the name and employer identification number of theentity, and the control and electronic filing confirmation numberof Form 480.60 EC received.

Also, you must indicate whether the entity elected the optionaltax under Section 1115.11 of the Code. As provided in thisSection, the shareholders will not be responsible for the paymentof the income tax of the corporation of individuals for the year ofthe election, and for those purposes, the distributable sharereceived by the shareholder will be considered an exclusionfrom gross income, although it will be considered to determinethe tax base of the shareholder's participation in the corporationof individuals.

Part IV of this Schedule is used to determine the taxpayerdistributable share on the net profit or loss of one or morecorporations of individuals, including those losses carried overfrom previous years.

You must complete this Schedule annually, irrespective of thefact that the partnership, special partnership or corporation ofindividuals have derived gains or losses.

For the 2020 year it will be required to include the distributableshare in the gross income from services rendered and in thegross income items reported by the pass-through entity. Thisinformation will come from lines 23, 23 (a), 25 and 25(a), PartIII of Form 480.60 EC as well as line 1 O, Part III of Form480.60 F. In the case of pass-through entities for which a FederalForm K-1 has been received, the taxpayer will have to determinethe business volume of said entity and include it in the spaceprovided in the column that is reporting the activity of said pass-through entity.

PART I - ADJUSTED BASIS DETERMINATION OF APARTNER IN ONE OR MORE SPECIAL PARTNERSHIPSOR PARTNERSHIPS

Line 1 - Enter the amount from Part I, line 4 of the 2019 yearSchedule R Individual.

The basis of a partner’s share from a partnership or specialpartnership will be the amount of cash or the adjusted basis ofany property that is not considered cash, contributed to saidpartnership.

This basis will be adjusted by the following entries or transactionsmade during the taxable year of the determination and othersincluded on previous year income tax return.

Line 2 - Basis increase

(a) Enter the partner’s distributable share in the pass-throughentity's income and profits for the current year. This amountmust be the same as the one shown on line 7(c), Part II ofthis schedule.

(b) Enter the capital contributions made by the partner to thepass-through entity during the current year, as shown incolumn (a), Part II of Form 480.60 EC.

(c) Enter the partner's distributable share in the pass-throughentity's gains from the sale or exchange of capital assets forthe current year.

(d) Enter the partner's distributable share in the pass-throughentity's exempt income for the current year.

(e) Enter other income or profits like for example, thedistributable share in the dividends and interests receivedby the partnership or special partnership.

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Line 3 - Basis decrease

(a) Enter the distributable share in the loss attributable to thepartner on the previous year. This amount shall be thesame as line 4, Part V of Schedule R Individual of taxableyear 2019. If a partner has share in losses from more thanone special partnership or partnership, the total allowableloss balance, as determined in the previous taxable year,will be attributed proportionally to the loss of each one of thepartnerships. The allocation will be made using as a factorthe adjusted basis of the partner's share in each one of thepartnerships at the close of the previous taxable year.

(b) Enter the distributable share in the partnership or specialpartnership’s capital losses.

(c) Enter the distributions made to the partner by the partnershipor special partnership, whether in cash or in property,including tax exempt income.

(d) Enter the amount claimed as credit against the income tax onthe previous taxable year for investments made in partnershipsor special partnerships engaged in the production of featurefilms or under the Puerto Rico Tourism Development Act of1993, the Puerto Rico Capital Investment Fund Act, the PuertoRico Agricultural Tax Incentives Act, as amended, or any othercredit admitted by law to the partners related to the partnershipor special partnership’s activities.

(e) Enter the amount claimed as credit against income tax forwithholding of tax at source from the distributable share madeto a resident partner (30%) or to a nonresident alien partner(29%).

(f) Enter any expense from the partnership or specialpartnership not allowed as a deduction while determiningyour net income and that is not capitalized.

(g) Enter the distributable share in net losses from tax exemptoperations under the Tourism Incentives Act of 1983 andthe Tourism Development Act of 1993.

(h) Only in the case of partnerships, enter the charitablecontributions to eligible entities.

(i) Enter the partner's debts assumed and guaranteed by thepartnership.

Line 4 - The amount of this line cannot be less than zero. If theamount on this line is less than zero, enter zero and recognizea gain for the amount of the adjusted basis that is less than zero.

PART II - DETERMINATION OF NET INCOME OR LOSS INONE OR MORE SPECIAL PARTNERSHIPS ORPARTNERSHIPS

For taxable years beginning after December 31, 2010, if thespecial partnership or partnership derived losses, you may notclaim them as a deduction against other income other thanincome derived from other special partnerships, partnershipsor corporation of individuals. Said loss will be limited to theadjusted basis of the partner’s share in the partnership at theend of the taxable year in which the loss is claimed.

The adjusted basis limitation will be determined for each one of thespecial partnerships or partnerships in which the partner invests.

Line 5(a) - Enter the distributable share in the loss of thespecial partnership or partnership attributable to the partner inaccordance to the share percentage. This amount is informedto the partner on Form 480.60 EC.

Line 5(b) - Enter the distributable share in the loss of the partnershipor special partnership owned by the entity in accordance with theshare percentage. This amount is informed to the partner on Form480.60 EC.

Line 5(c) - Enter the carryover losses which were not claimed inprevious years due to the limitation. This amount must be the sameas the one shown on line 6, Part V of Schedule R Individualincluded on the income tax return of taxable year 2019. If a partnerowns shares in losses from more than one special partnership orpartnership, the balance subject to the loss carryover, as determinedon the previous taxable year, will be proportionally attributed to theloss of each one of the partnerships. Said attribution will be done byusing as factor the adjusted basis of the partner’s share in each oneof the partnerships at the end of the previous taxable year.

Line 6 - Enter on this line the amount determined in Part I, line4. If the special partnership or partnership has an exemptiondecree under the Puerto Rico Tourism Incentives Act or thePuerto Rico Tourism Development Act, you may use the debtsof the special partnership or partnership in proportion to yourshare, to increase your adjusted basis, only to claim losses ofthe special partnership or partnership from this activity. Alsoyou may use the partnership's current debts assumed andguaranteed by the partner.

Line 7(a) - Enter the partner’s distributable share in the incomeand profits derived from the special partnership or partnershipduring the year. This amount is reflected in Part III, line 5 ofForm 480.60 EC.

Line 7(b) - Enter the distributable share in the gain of apartnership or special partnership owned by the entity inaccordance with the share percentage. This amount is informedto the partner on Form 480.60 EC.

Line 8 - Enter the smaller of the amounts on lines 5(d) and 6(d).This will be the maximum admissible amount of losses derivedfrom partnerships and special partnerships to determine theamount of aggregated net loss from partnerships, specialpartnerships and corporations of individuals to be used againstthe aggregated net income of said pass-through entities.

PART III - ADJUSTED BASIS DETERMINATION OF ASTOCKHOLDER IN ONE OR MORE CORPORATIONS OFINDIVIDUALS

Line 1 - Enter the adjusted basis of the corporation of individualsat the close of the previous taxable year.

The basis of a stockholder’s share from a corporation ofindividuals will be the amount of cash, or the adjusted basis ofany property that is not considered cash, contributed to saidcorporation.

This basis will be adjusted by the following entries or transactionsmade during the taxable year of the determination and othersincluded on previous year income tax return.

Line 2 - Basis increase

(a) Enter the stockholder’s distributable share in the pass-through entity's income and profits for the current year. Thisamount must be the same as the one shown on line 7, PartIV of this schedule.

(b) Enter the capital contributions made by the stockholder tothe pass-through entity during the current year, as shownin column (a), Part II of Form 480.60 EC.

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(c) Enter the stockholder's distributable share in the pass-through entity's gains from the sale or exchange of capitalassets for the current year.

(d) Enter the stockholder's distributable share in the pass-through entity's exempt income for the current year.

(e) Enter other income or profits like for example, thedistributable share in the dividends and interests receivedby the corporation of individuals.

Line 3 - Basis decrease

(a) Enter the distributable share in the loss attributable to thestockholder on the previous year. This amount shall bethe same as line 4, Part V of Schedule R Individual oftaxable year 2019. If a stockholder has share in lossesfrom more than one corporation of individuals, the totalallowable loss balance, as determined in the previoustaxable year, will be attributed proportionally to the loss ofeach one of the corporation of individuals. The allocationwill be made using as a factor the adjusted basis of thestockholder's share in each one of the corporations ofindividuals at the close of the previous taxable year.

(b) Enter the distributable share in the corporation ofindividual’s capital losses.

(c) Enter the distributions made to the stockholder by thecorporation of individuals, whether in cash or in property,including tax exempt income.

(d) Enter the amount claimed as credit against the income taxon the previous taxable year for investments made incorporation of individuals engaged in the production offeature films or under the Puerto Rico Tourism DevelopmentAct of 1993, the Puerto Rico Capital Investment Fund Act,the Puerto Rico Agricultural Tax Incentives Act, asamended, or any other credit admitted by law to thestockholders related to the corporation of individual’sactivities.

(e) Enter the amount claimed as credit against income tax forwithholding of tax at source from the distributable sharemade to a resident stockholder (30%) or to a nonresidentalien stockholder (33%).

(f) Enter any expense from the corporation of individuals notallowed as a deduction while determining your net incomeand that is not capitalized.

(g) Enter the distributable share in net losses from tax exemptoperations under the Tourism Incentives Act of 1983 andthe Tourism Development Act of 1993.

(h) Enter the stockholder's debts assumed and guaranteedby the corporation of individuals.

Line 4 - The amount of this line cannot be less than zero. If theamount on this line is less than zero, enter zero and recognizea gain for the amount of the adjusted basis that is less than zero..PART IV - DETERMINATION OF NET INCOME OR LOSSIN ONE OR MORE CORPORATIONS OF INDIVIDUALS

The adjusted basis limitation will be determined for each one ofthe corporations of individuals in which the stockholder invests.

Line 5(a) - Enter the distributable share in the loss of thecorporation of individuals attributable to the stockholders inaccordance to the share percentage. This amount is informedto the stockholder on Form 480.60 EC.

Line 5(b) - Enter the carryover losses which were not claimedin previous years.

Line 6 - Enter on this line the amount determined in Part III, line4. If the corporation of individuals has an exemption decreeunder the Puerto Rico Tourism Incentives Act or the PuertoRico Tourism Development Act, you may use the debts of thecorporation of individuals in proportion to your share, toincrease your adjusted basis, only to claim losses of thecorporation of individuals from this activity. Also you may usethe current debts of the corporation of individuals assumed andguaranteed by the stockholder.

Line 7 - Enter the stockholder’s distributable share in the incomeand profits derived from the corporation of individuals duringthe year. This amount is reflected on Form 480.60 EC .

Line 8 - Enter the smaller of the amounts on lines 5(c) and6(d). This will be the maximum admissible amount of lossesderived from corporations of individuals to determine the amountof aggregated net loss from partnerships, special partnershipsand corporations of individuals to be used against theaggregated net income of said pass-through entities.

SCHEDULE T INDIVIDUAL – ADDITION TO THE TAXFOR FAILURE TO PAY ESTIMATED TAX IN CASE OFINDIVIDUALS

Use this schedule only if you have the obligation to pay estimatedtax to determine the addition to the tax for failure to pay estimatedtax.

Taxpayers who only receive income from wages reported onlines 1(B) and 1(C), Part 1 of the return or from Part I, lines 1and 2 of the Schedule CO Individual, and for whom thecorresponding withholding was made, do not have to completethis Schedule. This Schedule will not be necessary for thosetaxpayers who only receive income from pensions reported inSchedule H Individual and for which the $11,000 or $15,000exemption is claimed on line 8, Part II of Schedule H Individualand that has been made the withholding of tax at source.

In the case of taxpayers who have determined their tax underthe optional tax method (Schedule X Individual), they will notbe subject to this addition. These taxpayers will use this ScheduleT Individual only to enter in Part II the amount of tax paid perinstallments and the payment date. In these cases, it will not benecessary to include information in Part I of this Schedule TIndividual.

PART I – DETERMINATION OF THE MINIMUM AMOUNTOF ESTIMATED TAX TO PAY

Line 2 – Include the total amount of withholdings and creditsprovided by the Code or special acts for the taxable year,including the non refunded tax paid in excess corresponding tothe previous taxable year.

Line 3 – If the amount of estimated tax to be paid is $1,000 orless, you were not required to pay estimated tax, thus, do notcomplete this Schedule.

Line 4 – If you are a farmer and elected the provisions underSection 1061.22 of the Code, then multiply line 1 by 66 2/3%.

Line 5 – Enter the greater of the amount shown on lines 22, 23,and 24, Part 3 of the preceding taxable year’s return, or anamount equal to the tax determined at the rates and under thelaw applicable to the taxable year using the data from thepreceding taxable year return. For additional information, refer

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to the part of Penalties under the topic of OBLIGATION TO PAYESTIMATED TAX.

PART II – ADDITION TO THE TAX FOR FAILURE TO PAY

Section A – Failure to Pay

Select the oval for calendar year if your taxable year ends onDecember 31, otherwise, select the oval which indicates fiscalyear. If you selected the oval for fiscal year, enter in Columns(a), (b), (c) and (d), the date corresponding to the 15th day ofthe fourth month, sixth month, ninth month of the taxable year,and the first month following the close of the taxable year,respectively.

Line 8 – If the obligation to pay the estimated tax was met forthe first time before the first day of the fourth month of thetaxable year, enter in each of the Columns 25% of line 7. If theobligation was met for the first time after the last day of thethird month and before the first day of the sixth month of thetaxable year, enter in Columns (b), (c) and (d) 33% of line 7.If the obligation was met for the first time after the last day ofthe fifth month and before the first day of the ninth month of thetaxable year, enter in Columns (c) and (d) 50% of line 7. If theobligation was met for the first time after the last day of theeighth month, enter in Column (d) 100% of line 7. If there is anychange in the computation of the estimated tax, enter the amountof the installment according with the corresponding change.

Line 9 – Enter in Column (a) the amount of estimated tax paidno later than April 15 of the taxable year (the 15th day of thefourth month of the taxable year if you have a fiscal year); inColumn (b), the estimated tax paid after April 15 of the taxableyear (the 15th day of the fourth month of the taxable year if youhave a fiscal year) and no later than June 15 of the taxableyear (the 15th day of the sixth month of the taxable year if youhave a fiscal year); in Column (c), the estimated tax paid afterJune 15 of the taxable year (the 15th day of the sixth month ofthe taxable year if you have a fiscal year) and no later thanSeptember 15 of the taxable year (the 15th day of the ninthmonth of the taxable year if you have a fiscal year); and inColumn (d), the estimated tax paid after September 15 of thetaxable year (the 15th day of the ninth month of the taxableyear if you have a fiscal year) and no later than January 15following the taxable year (the 15th day of the first monthfollowing the taxable year if you have a fiscal year). Transferthe total of this line to Schedule B Individual, Part III, line 1.

Line 10 – If various payments were made in the periodsdescribed in the instructions for line 9, indicate the amount anddate of the payments.

Line 11 – To determine the amounts to be entered in Columns(b), (c) and (d), you must complete lines 11 through 17 ofprevious column.

Any overpayment, after covering the estimated tax payment ofthe corresponding installment, will be attributed first to the amountof estimated tax of previous installments due and not paid andthen to the subsequent installments.

Section B – Penalty

The first two estimated tax installments for the taxable year2020 were postponed. For what should not compute anypenalty in Section B columns (a) and (b). Even so, you canenter on line 9 of Part II any payment of estimated tax that thetaxpayer has made during the postponed periods. For moredetails, Refer to Administrative Determination No. 20-10 of March24, 2020.

Line 18 – 10% of the estimated tax of each installment due butnot paid will be added to the tax.

Line 19 – The amount determined on this line reflects theproportion of the penalty attributable to the installments ofestimated tax paid after the due date, if applicable.

SCHEDULE X INDIVIDUAL - OPTIONAL TAX TO SELFEMPLOYED INDIVIDUALS

Complete this Schedule if you chose to pay the optional tax inthe case of self employed individuals engaged in trade orbusiness and whose source of income comes substantiallyfrom said industry or business. You must indicate in the headingof this Schedule if the election for the optional tax was madethrough the Partial Waiver for the withholding at source of 6%,as provided by Internal Revenue Circular Letter No. 19-16 ofDecember 9, 2019 ("CC RI 19-16"), or with this return.

Pursuant to Section 1021.06 of the Code, to be eligible for theOptional Tax, the individual must comply with the followingrequirements:

• The income received must be substantially from servicesrendered. For these purposes, the income shall beconsidered as substantially from services rendered whensaid category of income represents at least eighty percent(80%) of the total gross income received during the taxableyear, and

• All income received must be subject to the withholding ofincome tax at source provided in Section 1062.03 of theCode or to the payment of estimated tax, as established inSection 1061.20 of the Code applicable to individuals.

However, in the case of taxpayers who choose the optional taxfor taxable year 2020, must make sure to comply with the taxresponsibility not later than the deadline to file the return, withoutconsidering extension of time requested.

In the case of taxpayers who choose for the optional tax bymeans of the Partial Waiver, as provided in CC RI 19-16, theyshall be forced to determine their tax according to the provisionsof the Schedule X Individual of the return, as long as the incomefor services rendered represent eighty percent (80%) or moreof total gross income received during the taxable year. However,if the income for services represents less than eighty percent(80%) of total gross income, this taxpayer shall not be allowedto pay taxes at the optional tax rates and will be subject to theregular tax rates.

The eligible individual who choose this optional tax shalldetermine it by applying the rate provided on line 4, Part II ofthis schedule.

PART I - GROSS INCOME

Line 1(C) - Transfer to this line the amount determined on line6, Part I of Schedule R Individual of the taxpayer or spouse towhom this Schedule X Individual belongs.

Line 2(A) - Enter on this line the result of the sum of the amountsincluded on lines 1B, 1C, 2A, 2B, 2E, 2F, 2H, 2I, 2J, 2L, 2M,2N and 2O of Part 1, page 2 of the return, PLUS: the amountsincluded in the (Total $ ____) row of lines 2C, 2D, 2G, 2P, 2Q,2R and 2T of Part 1, page 2 of the return.

Under Optional Computation, the gross income will be determinedfor the taxpayer or spouse, as applicable, by writing on this linethe amounts included in Part I, lines 1, 2, 3A, 3B, 3E, 3F, 3H, 3I,

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3J, 3L, 3M, 3N and 3O from Schedule CO Individual, PLUS:the amounts included in the (Total $ ____) row of lines 3C, 3D,3G, 3P, 3Q, 3R and 3T, Part I, page 1 of Schedule CO Individual.

Line 2(B) - Transfer to this line the amount determined on line13, Part I of Schedule R Individual of the taxpayer or spouse towhom this Schedule X Individual belongs.

Line 2(C) - Transfer to this line the amount determined on line43 less line 10, Part II, of Schedule IE Individual. In the case ofmarried filing jointly, income generated by both spouses shallbe added. Use the additional lines provided to identify possibleadjustments to the exempt income product of items that alreadyare part of the gross income previously reported in Part 1,page 2 of the return and that are part of line 2(A), Part I of thisSchedule X Individual.

Line 4 - Divide line 1D by line 3 of this Part I. If the result is lessthan 80%, do not complete the rest of this Schedule. In thesecases, the taxpayer is not eligible for the optional tax and it willdetermine the tax using the tax rates on line 14, Part 3 of thereturn or on line 1, Part III of the Schedule CO Individual, asapplicable. If the result is equal or greater than 80%, continuewith Part II of this Schedule. Enter the result in percentageterms rounded to two (2) decimal places.

PART II - COMPUTATION OF THE OPTIONAL TAX ONGROSS INCOME

Line 4 - Multiply line 3 of Part II by the applicable tax that isincluded below and enter the result.

Optional Tax to Individuals who Rendered Services:

If the gross income is: The tax will be:

Not over $100,0006%

Over $100,000, butnot over $200,000 10%

Over $200,000, butnot over $300,000 13%

Over $300,000, butnot over $400,000 15%

Over $400,000, butnot over $500,000 17%

Over $500,000 20%

Line 5 - You must complete Schedule C Individual and identifyin the heading of said Schedule that it is computed for optionaltax purposes. Transfer the amount determined on line 6(c),Part IV of the Schedule C Individual. It is important that if it isreflected amount on this line 5, the amount determined on line6(c), Part IV of Schedule C Individual will not be transferred toline 18, Part 3 of the return nor line 5, Part III of Schedule COIndividual with respect to the spouse who chose the optionaltax, as applicable.

Taxpayers who choose to pay tax under the optional tax willnot use lines 14 to 22, Part 3, page 2 of the return or Part III ofSchedule CO Individual to determine the total tax to be paid. Inthese cases, these lines will be left blank.

OBLIGATION TO PAY ESTIMATED TAX

WHO HAS THE OBLIGATION TO PAY ESTIMATED TAX?

Any individual whose estimated tax for any taxable year ismore than $1,000, except the following:

• those whose gross income was derived exclusively fromwages or pensions subject to withholding of tax at source;

• those whose gross income comes exclusively fromremuneration received for services rendered to theGovernment of the United States subject to withholding oftax at source for purposes of the United States Government;

• those whose gross income comes exclusively fromremuneration for services performed in agricultural labornot subject to withholding of tax at source under Section1062.01 of the Code;

• those individuals who, in addition to the three previouspremises of income, receive income from Distributions dueto a disaster declared by the Governor of Puerto Rico,according to Sections 1081.01(b)(1)(D) and1081.02(d)(1)(I) of Code; or

• individuals who in addition to the income listed abovereceive less than $5,000 in income from other sources.

The estimated tax will be the excess of:

1) the amount of tax estimated by the individual for the taxableyear, including the alternate basic tax and the gradualadjustment, among other taxes, over

2) the amount of withholdings and credits provided by theCode or special laws estimated by the individual for thetaxable year, including the non refunded tax paid in excesscorresponding to the previous taxable year.

However, if the total amount of tax is $1,000 or less, youare not required to pay estimated tax.

PAYMENT OF TAX

The estimated tax for the taxable year must be paid in fourequal installments:

1st installment: 15th day of the fourth month2nd installment: 15th day of the sixth month3rd installment: 15th day of the ninth month4th installment: 15th day of the first month

of the following taxable year.

If the obligation to pay estimated tax arises for the first time afterthe last day of the third month and prior to the first day of thesixth month of the taxable year, the installments will be:

1st installment: 15th day of the sixth month2nd installment: 15th day of the ninth month3rd installment: 15th day of the first month of

the following taxable year.

If the obligation to pay estimated tax arises for the first time afterthe last day of the fifth month and prior to the first day of the ninthmonth of the taxable year, the installments will be:

1st installment: 15th day of the ninth month2nd installment: 15th day of the first month of

the following taxable year.

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If the obligation to pay estimated tax arises for the first time afterthe last day of the eighth month of the taxable year, the estimatedtax will be paid in its entirety on the 15th day of the first month ofthe following taxable year.

The estimated tax installments will be paid electronically throughSURI.

CHANGES IN THE ESTIMATED TAX COMPUTATION

If there is any change in the estimated tax computation as a result ofa change in income, personal exemption, exemption for dependentsor for any other reason, the remaining installments must beproportionally increased or reduced to reflect the increase orreduction in the estimated tax. On the other hand, if on or beforeJanuary 15 of the following taxable year the final income tax returnhad been filed and the income tax balance is paid, then

1) if you are not required to make estimated tax paymentsduring the taxable year but you are required to pay it onor before said January 15, such return will be consideredas such payment; and

2) if the tax determined in the return, reduced by the deductionsand credits provided in the Code or special laws for thetaxable year is more than the tax estimated by the taxpayer,such return will be considered as a change in thecomputation of the estimated tax.

FARMERS

If 2/3 or more of an individual estimated gross income wasderived from agricultural activities, the payment of estimated taxwill be due on January 15 of the following year, if the income taxreturn is filed on a calendar year basis, or no later than the 15thday of the month in which the following taxable year begins, ifthe income tax return is filed on a fiscal year basis.

Farmers who file the income tax return no later than January31 of the following year (if they file on a calendar year basis) orno later than the last day of the month in which the followingtaxable year begins (if they file on a fiscal year basis) and payin its entirety the total amount determined on the income taxreturn no later than on said date, it will be considered as if theestimated tax payment would have been made no later thanJanuary 15.

PENALTIES

The Code establishes a 10% penalty of the amount of anyestimated tax installment not paid. For these purposes, theestimated tax will be the smaller of:

1) 90% of the tax for the taxable year, or

2) the greater of:

a) the total income tax determined as it results from thepreceding year’s income tax return, or

b) an amount equal to the tax determined at the rates andunder the law applicable to the taxable year using thedata in the return of the individual for the precedingyear.

The above subsection 2 should not apply if the precedingtaxable year was not a 12 months taxable year, or if thetaxpayer filed a return for the preceding taxable year in whicha tax was not reflected, without considering any tax credit towhich he/she was entitled, including credits for taxes withheldor paid. On the other hand, you may consider any credit for

taxes paid or accrued during the taxable year to the UnitedStates, its states, territories and possessions, or any foreigncountry to which you are entitled.

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Occupational CodesOCCUPATION OCCUPATIONCODE CODE

Accounts AdjusterAccountant or AuditorAdvertising AgentArchitectArtist, Actor, Dancer, SingerAutomotive Body and Related RepairerAviculturistButcherCabinetmakerCarpenterCarrier WorkerCashierComputer ProgrammerConstruction PainterConstruction WorkerContractorCook (Food Preparation Worker)Correction Officer and JailerCustomer Service RepresentativeData Entry OperatorDrafterDriver (Other)EconomistElectric Equipment OperatorElectricianEmbalmer and GravediggerEngineerFarmerFinancial Institution ClerkFinancial Manager and SupervisorFiremanFlight AttendantForensic PathologistGarbage ManGardenerGeneral Manager and SupervisorGeneral Office ClerkGeneralist PhysicianHairstylist, Barber and CosmetologistHeavy Equipment OperatorHousehold and Domestic ServicesIndustrial Equipment OperatorIndustrial MechanicIndustry Manager and SupervisorInformation Systems ManagerInsurance Agent and BrokerJanitorJudgeLand Surveyor

Language PathologistLawyerLegislator and MayorLocksmithMasonMechanic and Automotive TechnicianMedical AssistantMedical PropagandistMedical TechnologistMilitary Man (Soldier)NursePharmaceutical Equipment OperatorPharmacist or Pharmacy AssistantPilotPlannerPlumberPolice Officer – State and MunicipalPostman and MessengerPrivate GuardProfessional AthleteProfessional TherapistProfessor – UniversityPsychologistRadio and Television AnnouncerRadiologistReal Estate Agent and BrokerRefrigeration TechnicianRetail Sales RepresentativeRetired – PensionerSales Manager and SupervisorSalesperson – RetailSalesperson – WholesaleSchool AdministratorScientistSecretarySecurities Agent and BrokerSocial WorkerSoldererSpecialist PhysicianTapestry MakerTeacherTelephonic Equipment OperatorTellerTravel AgentTruck DriverVeterinarianWaiterWholesale RepresentativeOther Work or Profession

6240541193005616238133216209621162168101621262156213810254212384931533334300711262176112542251316214531281064610813042144611431161115419810452316245311962103120611051125221561548555418421543108110

5243541254175415711548001123445233233322810242135110238323822360421293154302510854164856542051113324812354141110522352229314611581248112810342168111620881214857810531013110310051095242561793015413

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CHECK LIST

TAXPAYER, REVIEW YOUR DATA AND AVOID THE MOST COMMON MISTAKES THAT MAY DELAY THEPROCESSING OF YOUR RETURN

Verify that your Social Security number is the one shown on the Withholding Statement (Form 499R-2/W-2PR) orInformative Returns (Forms 480.6A, 480.6B, 480.6C, 480.6D, 480.6 SP or 480.7C, among others).

Make sure to write correctly your Social Security number in your 2020 Return.

In the case of married taxpayers, make sure that the name and Social Security number of each spouse are correct.

If you claim dependents, make sure to complete Schedule A1 Individual in your return. Confirm that the completename (with both last names), relationship, and Social Security number of each dependent claimed, are correct.

Before electronically filing the return, make sure that all required schedules were completed.

Inform all your income, whether or not they are included in a Withholding Statement or Informative Return. TheDepartment of the Treasury matches the information provided by the taxpayers in their returns with the informationprovided by the employers and withholding agents.

Make sure that the Withholding Statements and Informative Returns reported on the return include the electronicfiling confirmation number.

Make sure that your postal address is complete.

Remember to complete the authorization for direct deposit on page 1 to receive your refund faster. Make sure to enterthe correct information of your bank account. If you file the return with the incorrect information of your bank accountor if you want to change the refund payment method by direct deposit, you must complete Form SC 2718 and deliverit personally at any of our Taxpayer's Service Centers.

If you have to make a payment with check, make sure to fill it out on behalf of the Secretary of the Treasury, that theamounts match, that it is signed, that it has enough funds to make the payment, and include the Social Securitynumber. A check with mistakes is subject to interests and surcharges.

If you are making the payment by Automated Clearing House (ACH), make sure to provide the correct information ofthe bank account before completing the electronic filing. If the payment is rejected by the financial institution, theDepartment of the Treasury may impose a penalty on the amount of the payment.

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GOVERNMENT OF PUERTO RICODEPARTMENT OF THE TREASURYPO BOX 9022501SAN JUAN PR 00902-2501

DO NOT FORGET TO WRITE YOUR SOCIAL SECURITY NUMBER IN THECORRESPONDING BOX ON THE RETURN AND SCHEDULES. THIS NUMBERIS NECESSARY TO PROCESS YOUR RETURN.

IMPORTANT NOTICE: